If inflation is very high, say 50 or 100 percent a year, monetary policymakers wishing to lower it will shift their focus to controlling:
A) the long-term interest rate.
B) the short-term interest rate.
C) the exchange rate.
D) money growth.

Question

Quizplus · Accepted Answer

When inflation is very high, the most effective way to lower it would be to control the growth of the money supply. This can be done through various measures, such as increasing reserve requirements for banks, open market operations, and adjusting interest rates. However, controlling money growth would be the most direct and effective method to tackle inflation. Therefore, the correct option is D.

If Inflation Is Very High, Say 50 or 100 Percent