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?

Answer 1

Answer:

contractionary monetary policy

Explanation:

When the Fed engages in a contractionary monetary policy, it will raise the interest rates of US securities and decrease the money supply. When the Fed increases the interest rate of US securities it will sell more securities, and that way it will absorb money from the economy. As interest rates increase, the economy cools down.