Question

If inflation begins to rise rapidly, which step is the Federal Reserve likely to take? A. Decrease the federal funds rate B. Increase the reserve requirement C. Buy government securities D. Decrease the discount rate

Answer 1

Inflation is a condition wherein the economy grows because of the increased spending. When this occurs, the prices become high and the currency of the state will be worth less than its worth prior. One of the methods used to counter the problems brought upon by inflation is the increasing of the reserve requirement by Federal Reserve. Thus, the answer is letter B.