On June 5, 2003, the European Central Bank acted to decrease the short-term interest rate in Europe by half a percentage point, to 2 percent. The bank’s president at the time, Willem Duisenberg, suggested that, in the future, the bank could reduce rates further. The rate cut was made because European coun- tries were growing very slowly or were in recession. What effect did the bank hope the action would have on the economy? Be specific. What was the hoped-for result on C, I, and Y?
On June 5, 2003, the European Central Bank acted to decrease the short-term interest rate in Europe by half a percentage point, to 2 percent. The bank’s president at the time, Willem Duisenberg, suggested that, in the future, the bank could reduce rates further. The rate cut was made because European coun- tries were growing very slowly or were in recession. What effect did the bank hope the action would have on the economy? Be specific. What was the hoped-for result on C, I, and Y?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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On June 5, 2003, the European Central Bank acted to decrease
the short-term interest rate in Europe by half a percentage
point, to 2 percent. The bank’s president at the time, Willem
Duisenberg, suggested that, in the future, the bank could reduce
rates further. The rate cut was made because European coun-
tries were growing very slowly or were in recession. What effect
did the bank hope the action would have on the economy? Be
specific. What was the hoped-for result on C, I, and Y?
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