To permanently reduce the inflation rate,the Fed can cause a(n)________ in real GDP by ________ the real interest rate.
A) increase; raising
B) increase; lowering
C) decline; raising
D) decline; lowering

Question

Quizplus · Accepted Answer

To permanently reduce the inflation rate, the Federal Reserve (Fed) can cause a decline in real GDP by raising the real interest rate. Higher interest rates typically reduce borrowing and spending, which can lead to a slowdown in economic activity and help control inflation.

To Permanently Reduce the Inflation Rate,the Fed Can Cause A(n)________