Which of the Following Is Not an Appropriate Policy for a Central

question 40

Multiple Choice

Which of the following is not an appropriate policy for a central bank to follow if the economy is plagued with deflation?

• A)increasing the target interest rate on overnight loans
• B)using expansionary monetary policy to drive down interest rates
• C)consistently pursuing policy to promote the credibility of the central bank
• D)explicitly and credibly targeting inflation
• E)raising the ratio of reserves commercial banks are required to hold

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