Question : Macroeconomic policy tools include:
Option 1: Individual tax rates
Option 2: Consumer demand curves
Option 3: Central bank interest rates
Option 4: Price elasticity of supply
Correct Answer: Central bank interest rates
Solution : The correct answer is (c) Central bank interest rates.
Macroeconomic policy refers to the use of various tools and strategies by policymakers to influence and manage the overall performance of the economy. Central banks, as part of their monetary policy, often use interest rates to influence economic conditions. By adjusting interest rates, central banks can impact borrowing costs, investment levels, consumption, and overall economic activity. Lowering interest rates tends to stimulate borrowing, investment, and consumer spending, thereby promoting economic growth. Conversely, raising interest rates can cool down an overheating economy and control inflation.
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