Question

Inflation in the developing country of terbia has been rising over the last few years and is currently at a very high level. two stock market​ analysts, stanley durro and michelle​ thompson, are discussing the possible causes of inflation. michelle thinks that the real reason why prices are rising is because​ terbia's economy is expanding. stanley disagrees. he argues that the inflation is not demand​ driven; on the​ contrary, too much money in the economy is increasing the price level.

Answer 1

Answer:

C) The central bank has been increasing the target interest rate at regular intervals and it is now at its highest level in eight years.

Explanation:

Since the central bank has been increasing the interest rates in Terbia, this means that it has been engaging in a contractionary monetary policy. In other words, the central bank has been decreasing the money supply in Terbia. If the money supply has been decreasing constantly during the last 8 years, then the high inflation rate cannot be caused by an increase in the money supply.