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  •  Monetary policy, Inflation, Exchange rates

Click to read the article below and then answer the questions:

Turkey’s lira tumbles after central bank cuts rates

  • Why would an inflation rate of over 20% suggest the opposite decision to that taken by the Turkish central bank?

  • Explain why a negative real rate of interest will put downward pressure on a nation’s exchange rate

  • How can a weakening currency lead to further inflationary pressure?

  • Explain how central bank independence can promote economic stability

David Dike, Economic Research Council — Economic Episodes

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