When the Rate of In?ation in an Economy Is Low

question 19

Multiple Choice

When the rate of in?ation in an economy is low, _____ in order to avoid de?ation.

• A) the government has to reduce spending
• B) the central bank has to raise interest rates
• C) the central bank has to cut interest rates
• D) the government has to increase taxes

---

Definitions:

Functional Fixedness

A tendency to think of things based on their usual functions, which may make it harder to solve a problem.

Framing

The way information is presented or worded, which can significantly affect decisions and judgments.

Insight

The capacity to gain an accurate and deep understanding of someone or something, often suddenly and intuitively.

Mental Set

A psychological tendency to approach situations in a particular way due to past experiences and problem-solving patterns.