If The Central bank tries to keep the interest rate constant when the economy is operating on the steep part of the AS curve, _________ will occur?
Correct answer: A. a hyperinflation
- A. a hyperinflation
- B. a depression
- C. stagflation
- D. a recession
Explanation
On the steep part of the aggregate-supply curve, maintaining a constant interest rate may require the central bank to keep expanding the money supply as prices rise. Persistent monetary expansion can produce hyperinflation.
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About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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