New Enroll in RBI Grade B New Batch - Starts on May 21

    Question

    Country Y is experiencing high inflation rates due to a

    combination of factors, including supply chain disruptions, rising energy prices, and loose monetary policy. Which of the following measures is the central bank of Country Y likely to take to curb inflation?
    A Decrease interest rates. Correct Answer Incorrect Answer
    B Increase interest rates. Correct Answer Incorrect Answer
    C Increase government spending. Correct Answer Incorrect Answer
    D Decrease taxes. Correct Answer Incorrect Answer
    E Devalue the currency. Correct Answer Incorrect Answer

    Solution

    To combat high inflation, the central bank is likely to increase interest rates. This will make borrowing more expensive, reduce consumer spending and investment, and ultimately lower aggregate demand, leading to a decrease in the inflation rate.

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