ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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If inflation is too high, the Federal Reserve should ____ the federal funds rate.
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Increase
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Decrease
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Either A or B
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None of the above
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Explanation:
Detailed explanation-1: -When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down.
Detailed explanation-2: -Conversely, the Fed may choose to increase the federal funds rate if it predicts that the economy is heating up too much and causing prices to rise too rapidly (inflation).
Detailed explanation-3: -A higher fed funds rate means more expensive borrowing costs, which can reduce demand among banks and other financial institutions to borrow money. The banks pass on higher borrowing costs by raising the rates they charge for consumer loans.
There is 1 question to complete.