Question

Following a long period of slow​ growth, the government of country X decided to open its economy and reduce trade barriers in order to boost economic growth. This provided the expected impetus to the economy as competition increased and the efficiency of domestic firms improved. A decade after opening the​ economy, the​ country's GDP is now growing at an average of​ 7-8 percent annually. A group of economists claim that the standard of living of the people has improved substantially during this period. They also expect this impressive growth to continue over the next five years. Which of the​ following, if​ true, will indicate that the country may not be able to maintain this average growth over the next few​ years? A. The investment in public infrastructure has steadily increased over the last four years. B. The government reduced FDI restrictions in many domestic industries. C. Imports account for 12 percent of the​ country's GDP. D. The central bank announced its intention to take appropriate measures to ensure that inflation stays within control. E. The domestic currency is expected to remain stable in the near future.

Answer 1

Answer:

The answer is D. The central bank announced its intention to take appropriate measures to ensure that inflation stays within control.

Explanation:

The central bank announcing its intention to take appropriate measures to ensure that inflation stays within control may translate into slowing down of economic growth since the central banks usually use contractionary monetary policy to fight inflation which slows down the economic growth. The central bank will raise interest rates to make lending more expensive. which in turn will reduce the amount of money and credit that banks can lend. It lowers the money supply by making loans, credit cards, and mortgages more expensive.