Skip to main contentSkip to solution

In a time of deflation, the Central Bank should:

Solution

Correct Option: 1

In deflation, money supply should be expanded. The Central Bank lowers the bank rate (making credit cheaper) and purchases securities in the open market (injecting liquidity).

Keyboard Shortcuts

  • Left arrow: Previous question
  • Right arrow: Next question
  • S key: Jump to solution
  • Q key: Jump to question