Monetary policy to cure inflation might include
A)A decrease in discretionary spending.
B)The purchase of securities in the open market by the Fed.
C)An increase in automatic stabilizers.
D)An increase in the discount rate.

Question

Quizplus · Accepted Answer

An increase in the discount rate would discourage borrowing and therefore decrease the money supply, leading to a decrease in inflation. The other choices would not directly address inflation. A decrease in discretionary spending might decrease inflation indirectly by decreasing economic activity but is not a direct solution to inflation. The purchase of securities in the open market by the Fed and an increase in automatic stabilizers might increase the money supply and exacerbate inflation.

Monetary Policy to Cure Inflation Might Include