If an Economy's Inflation Rate Is Above Target, the Central

question 36

Multiple Choice

If an economy's inflation rate is above target, the central bank would be most likely to

• A) encourage banks to provide loans by lowering the refinancing rate.
• B) encourage banks to provide loans by raising the refinancing rate.
• C) restrict bank lending by lowering the refinancing rate.
• D) restrict bank lending by raising the refinancing rate.

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Definitions:

Contribution Margin

The difference between the sales revenue of a product and its variable costs, used to cover fixed costs and generate profit.

Sales Revenues

The total amount of money generated from sales of goods or services before any expenses are subtracted.

Variable Costs

Costs that vary directly with the level of production or sales volume, such as raw materials and packaging.

Scattergraph Method

A statistical tool used to plot data points on a graph to identify potential trends, often used in cost accounting to analyze variable costs against a level of activity.