Question

The chair of the Federal Reserve Bank spoke to the American public. The message she conveyed is that Fed economists are worried about inflation and believe the best course of action would be to slow the economy. Which of the following policies is the Fed most likely to pursue? A. Restrict the money supply and increase interest rates B. Devalue the dollar on international currency exchanges C. Increase taxes D. Decrease interest rates

Answer 1

Restrict the money supply and increase interest rates policies is the Fed most likely to pursue.

Option: A

Explanation:

The Fed economists are tensed about inflation and according to them the best practice can be done in such scenario is to slow the economy by pursuing the reduction is the money supply and hiking the rate of interest.

By investing less money in the market this strategy will keep public in hold to grab the policies and by increasing interest rate will control the inflation by utilizing less resources then earlier the public use to. A rise in the money disbursement works both by reducing interest value, which stimulate investment and by placing more monetary into the hands of customers, making them practice more comfortablity and increasing expenditure.