When the Federal Reserve wants to slow down the economy that is growing at an unsustainable rate,the Federal reserve can
A) decrease interest rates by increasing the money supply.
B) increase interest rates by increasing the money supply.
C) increase interest rates by decreasing the money supply.
D) decrease interest rates by decreasing the money supply.

Question

Quizplus · Accepted Answer

When the economy is growing at an unsustainable rate, the Federal Reserve can increase interest rates in order to slow down borrowing and spending. This can be done by decreasing the money supply, as less money available in the economy would make it more expensive and difficult to borrow. Therefore, the correct choice is C - increase interest rates by decreasing the money supply.

When the Federal Reserve Wants to Slow Down the Economy