If the U.S. economy is booming at a fast rate, the central bank would take the following action to ward off inflation:
A. raise taxes B. lower taxes C. raise interest rates D. lower interest rates
Correct Answer is option C
Raise interest rate wil tends to lower inflation.
Higher interest rate tends to dcrease in demand people will do more savings and investment because they will earn higher interest income. Lower spending tends to control or reduce in the inflation.
If the interest rate is lower people will spend more money and tends to higher inflation.
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