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Economics · May / June 2019 · Paper 11 · Question 19

2281Monetary policy

Which statement about interest rate changes is accurate?

  1. AA fall in interest rates will always increase inflation.
  2. BA rise in interest rates may increase cost-push inflation.
  3. CA rise in interest rates will raise the level of investment in a country.
  4. DInterest rate changes have no impact on the level of production.

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Correct answer: B. A rise in interest rates may increase cost-push inflation.

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