To reduce inflation, the federal reserve could
a) expand money supply in order to raise interest rates, which increases investment
b) expand money supply in order to lower interest rates, which increases investment
c) contract money supply in order to lower interest rates, which increases investment
d) contract money supply in order to raise interest rates, which decreases investment
e) buy bonds and increase discount rate to encourage borrowing
Ans: d) contract money supply in order to raise interest rates, which decreases investment
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A) the French franc B) the British pound C) the German mark D) the Italian lira
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What will be an ideal response?