Which of the Following Is an Appropriate Policy for a Central

question 63

Multiple Choice

Which of the following is 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 contractionary monetary policy to drive up interest rates
• C)consistently pursuing policy to promote the credibility of the central bank
• D)gradually raising the required reserve rate

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Definitions:

Transaction

An exchange or transfer of goods, services, or funds between two or more parties.

Account Type

A classification used in accounting to differentiate various types of financial records, such as assets, liabilities, equity, revenues, and expenses.

Profitable

A financial condition where income exceeds expenses resulting in a net gain.

Accounting Equation

The fundamental formula in accounting that states that assets equal liabilities plus equity.