For this investigation you will explore how the Argentine central bank can manage inflation through monetary policy. Some background: From 2015, Argentina started to borrow money from the IMF. In exchange, the IMF enforced austerity reforms to help build confidence in the economy. The austerity program in Argentina included reducing pensions, cutting employment in government jobs, and eliminating household subsidies. Using the text and your knowledge of aggregate demand and aggregate supply, explain the likely effects of austerity on the Argentinian economy. Inflation has been a challenge for the Argentine central bank. In 2018, inflation was over 48% and by January 2020 inflation climbed to 53%, one of the highest levels in the world. Inflation is very destructive because it eats away real incomes of workers and drives up costs for small businesses. Consider the tools available for monetary policy. Outline the advantages and disadvantages of each tool for solving inflation in Argentina (HL only). On August 12, 2019, the financial markets in Argentina crashed. The stock market contracted 38% in just one day. Argentina faced falling GDP, rising unemployment and snowballing inflation. In August 2019, Argentina's central bank raised interest rates to 75%. To what extent do you think this will be an effective policy for reducing inflation in Argentina? What will be the consequences on GDP and employment? Using what you know about monetary policy, can you suggest a better alternative