Question

An increase in interest rates might be an example of a ________

policy for the purpose of ________.
monetary; increasing the quantity of money
monetary; lowering unemployment
fiscal;

Answer 1

An increase in interest rates might be an example of a:

A) monetary; increasing the quantity of money.

Explanation: Increasing interest rates is a monetary policy tool used by central banks to control the money supply and manage inflation. When interest rates increase, borrowing becomes more expensive, which reduces the quantity of money available for borrowing and spending in the economy. This policy is typically employed to curb inflationary pressures by reducing the money supply and slowing down economic activity.