Country H has been experiencing cyclical unemployment and lower than potential output. The central bank decides to lower interest rates significantly. In the short run, which of the following outcomes is most likely to occur as a result of this policy change?

When the central bank lowers interest rates, borrowing money becomes cheaper for businesses and consumers. This can encourage companies to invest more in their operations, leading to increased production and hiring. As businesses expand and hire more workers, the cyclical unemployment in Country H is likely to decrease. For example, if a factory takes out a loan to buy new machinery, it may need to hire more workers to operate that machinery, thus reducing unemployment. Overall, in the short run, we can expect economic activity to rise as more people find jobs and spend money, helping the economy move closer to its potential output.