If the inflation rate starts to increase, a central bank most likely will:

CA Foundation · Business Economics · MTP · January 2026
If the inflation rate starts to increase, a central bank most likely will:
(A) A. try to stimulate aggregate supply through open market purchases
(B) B. change short-term interest rates through open market sales
(C) C. increase short-term interest rates by buying government bonds
(D) D. send signals to financial markets about upcoming open market purchases

Suggested Answer and Working Notes:

Correct Answer: Option (B)

B. change short-term interest rates through open market sales

Topics: Money Market

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