Which one of the following statements describing the effects of an increase in central bank interest rates is correct?
It will lead to a depreciation of the exchange rate, making exports more competitive.
It increases the cost of borrowing, which typically reduces the discretionary income of households with variable-rate mortgages.
It encourages commercial banks to relax their lending criteria, expanding the money supply.
It guarantees an immediate drop in both domestic cost-push and demand-pull inflation.
