This list describes recent events in a country. As you read the list, think about the role of the country’s central bank. The country has seen its GDP decline and unemployment rise for three consecutive quarters.
People are buying fewer cars, homes, and other goods and services. One reason people are buying less is that it is more difficult and more expensive to get loans to buy large items.
The country’s central bank decides to lower the interest rate on the loans it makes to the banks that people use.
Banks lower their interest rates.
More people take out loans.
With their loans, people start buying more goods and services, especially more expensive items such as cars.
Producers require more workers to make these goods and sell them.
Unemployment drops, and GDP begins to rise.
What action helped unemployment and GDP in this country? Justify your response.