How do central banks control inflation?
An example of an AI chatbot conversation about how central banks manage inflation.
How do central banks control inflation?
Central banks control inflation primarily through monetary policy, adjusting interest rates and regulating money supply.
What tools do they use to adjust interest rates?
They use tools like open market operations, the discount rate, and reserve requirements to influence interest rates.
Can you explain open market operations?
Open market operations involve buying or selling government securities to increase or decrease the money supply.
How does increasing interest rates help reduce inflation?
Increasing interest rates makes borrowing more expensive, which can reduce spending and slow down inflation.
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