The Federal Reserve's policy to "lean against the wind" means that
A) when output is high, the Fed sets a high interest rate.
B) when price levels are high, the Fed sets a low interest rate.
C) when output is low, the Fed sets a high interest rate.
D) when price levels are low, the Fed sets a high interest rate.

Question

Quizplus · Accepted Answer

"Leaning against the wind" means that the Fed tries to counteract any potential economic imbalances or bubbles before they become too severe. When output is high, there is a risk of inflation and overheating in the economy, so the Fed raises interest rates to discourage borrowing and spending, which can help cool down the economy. Therefore, choice A is the best answer.

The Federal Reserve's Policy to "Lean Against the Wind" Means