LG 1. Knowledge Comprehension

LO 1.1. Generate knowledge of core concept and theory A central bank lowers interest rates to reduce unemployment after a recession. Within a year, inflation starts to rise faster than expected. What best explains this outcome?

Question

LG 1. Knowledge Comprehension

LO 1.1. Generate knowledge of core concept and theory A central bank lowers interest rates to reduce unemployment after a recession. Within a year, inflation starts to rise faster than expected. What best explains this outcome?

Answer

Lower interest rates raised productivity, reducing unemployment and inflation together.

Answer

Lower interest rates caused cost-push inflation from higher production costs.

Answer

Lower interest rates increased aggregate demand, reducing unemployment but creating upward pressure on prices.

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LG 1. Knowledge Comprehension LO 1.1. Generate knowledge of core concept and...

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