Which policy is used by central banks to reduce inflation?
A. Expansionary fiscal policy
B. Increasing the money supply
C. Raising interest rates
D. Increasing government subsidies
Answer (1)
The correct answer is letter C. When inflation is too high, central banks raise interest rates to reduce borrowing and spending. This helps cool down demand and lowers inflation. In 2022–2023, the Bangko Sentral ng Pilipinas did this in response to rising food and fuel prices.
