Economics 0455 · IGCSE · Inflation and deflation

Inflation and deflation — practice question

A government wants to prevent deflation. Which policy combination would be the most effective in helping to achieve this aim?

  • Ainterest rate: increase; government spending: increase
  • Binterest rate: increase; government spending: reduce
  • Cinterest rate: reduce; government spending: increase
  • Dinterest rate: reduce; government spending: reduce

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