inflation and interest rates L10 M2 economics: Higher interest rates to control inflation:

Question

Higher interest rates to control inflation:

Dakota howells · Accepted Answer

1.	Increase in interest rates is a tightening of monetary policy 
2.	Should, in theory, lead to slower growth of aggregate demand
3.	Helps to control demand pull inflation by closing the output gap 
4.	Can also lead to a stronger exchange rate
5.	Leads to a drop in prices (costs)of imports.

inflation and interest rates L10 M2 economics

Higher interest rates to control inflation:

1. Increase in interest rates is a tightening of monetary policy 2. Should, in theory, lead to slower growth of aggregate demand 3. Helps to control demand pull inflation by closing the output gap 4. Can also lead to a stronger exchange rate 5. Leads to a drop in prices (costs)of imports.

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