The Fed fights inflation by _______
A. lowering the federal funds rate, which lowers interest rates and de-creases aggregate demand
B. raising the federal funds rate, which raises interest rates and decreases aggregate demand
C. decreasing the monetary base, which raises the interest rate and in-creases saving
D. lowering the long-term real interest rate, which increases investment and spurs economic growth
B By raising the federal funds rate, the Fed ultimately decreases aggregate demand, which slows the inflation rate.
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Fractional reserve banking takes its name from the fact that banks
a. hold only a fraction of their reserves at the bank itself. b. keep only a fraction of their total deposits on reserve. c. lend only a fraction of their total reserves to customers. d. reserve only a fraction of their activity for lending.
In the 1990's Ireland made unemployment benefits less generous. This change would likely have reduced
a. both structural unemployment and the natural rate of unemployment. b. structural unemployment but not the natural rate of unemployment. c. both frictional unemployment and the natural rate of unemployment. d. frictional unemployment but not the natural rate of unemployment.