n NISM Certifications
XV NISM Series XV
Medium

Why do governments or central banks sometimes intentionally slow down the economy?

Practice question from NISM XV Mock Test 7 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Because the Balance of Payments are very high

  2. Because the inflation is very high

    Correct answer

  3. C

    Because the foreign exchange reserves are very high

  4. D

    Because the unemployment rate is very high

Why this is the answer

During periods of high inflation, governments or central banks adopt contractionary measures—raising interest rates or reducing spending—to slow down economic activity and control price rises. Options A, C, and D are unrelated to intentional slowing of the economy for inflation control.

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NISM XV Mock Test 7