If the Fed raises interest rates because inflation is too high, this will cause
A)a long-term recession.
B)a temporary slowdown in growth but not a recession.
C)a permanent slowdown in growth.
D)either a temporary slowdown in growth or a recession.
E)a temporary recession.

Question

Quizplus · Accepted Answer

When the Fed raises interest rates because of high inflation, it is a monetary policy tool to slow down economic growth and prevent further inflation. This can lead to either a temporary slowdown in growth or a recession, depending on the severity of the interest rate hike and the state of the economy. Therefore, option D is the best choice.

If the Fed Raises Interest Rates Because Inflation Is Too