What actions should the Fed take if it believes the economy is about to experience a high rate of inflation?
What will be an ideal response?
If the Fed believes the economy is about to experience a high rate of inflation, it should conduct contractionary monetary policy, decreasing the money supply and raising interest rates. In implementing contractionary monetary policy, the Fed could raise the discount rate, raise the reserve requirement, and/or have the trading desk sell U.S. Treasury securities.
You might also like to view...
The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. A quota to prevent the overuse of the cod sets the catch equal to ________
A) 0 tons per week B) 300 tons per week C) 400 tons per week D) None of the above answers is correct.
To have more consumer goods in the future, we must
A) produce more capital goods today. B) lower current income. C) get government involved in the production process. D) stop producing all goods today.
An example of a public good that is difficult to make excludable is:
A. sewer systems. B. fire protection. C. national defense. D. All of these are nonexcludable public goods.
What are the two essential functions banks perform for the economy, and why are they important?
What will be an ideal response?