When inflation threatens,which of the following responses is the Fed likely to make?

Question

Quizplus · Accepted Answer

When inflation threatens, the Fed is likely to sell off government bonds to banks and other entities. This reduces the funds that banks can lend to individuals and businesses, which helps to decrease spending and ultimately reduces inflationary pressure. The other options listed (expanding the money supply, lowering the discount rate, and lowering interest rates) would all lead to increased spending and potentially worsen inflation.

When Inflation Threatens,which of the Following Responses Is the Fed