When domestic interest rates are too high, but this is expected to last for a short period, the central bank should: O Increase the key interest rate O Add more liquidity to the economy, e.g. by reducing the reserve requirement O Introduce a maximum interest rate (direct control of the interest rate level) O Observe interest rate developments, but usually do not change the use of instruments
When domestic interest rates are too high, but this is expected to last for a short period, the central bank should: O Increase the key interest rate O Add more liquidity to the economy, e.g. by reducing the reserve requirement O Introduce a maximum interest rate (direct control of the interest rate level) O Observe interest rate developments, but usually do not change the use of instruments
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![When domestic interest rates are too high, but this is expected to last for a short period, the central bank should:
O Increase the key interest rate
O Add more liquidity to the economy, e.g. by reducing the reserve requirement
O Introduce a maximum interest rate (direct control of the interest rate level)
O Observe interest rate developments, but usually do not change the use of instruments](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff64a7f68-a8d8-4609-95aa-fce2c58ca2c5%2F90d9260e-cb91-480e-aafc-ef64e33e9bc3%2F73a3qj_processed.jpeg&w=3840&q=75)
Transcribed Image Text:When domestic interest rates are too high, but this is expected to last for a short period, the central bank should:
O Increase the key interest rate
O Add more liquidity to the economy, e.g. by reducing the reserve requirement
O Introduce a maximum interest rate (direct control of the interest rate level)
O Observe interest rate developments, but usually do not change the use of instruments
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