In the short run, the Federal Reserve faces a tradeoff between

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In the short run, the Federal Reserve faces a tradeoff between inflation and unemployment. When the Fed increases the money supply, it can stimulate economic activity and employment, but also increase inflation. Conversely, when the Fed reduces the money supply, it can try to dampen inflation, but also risk slowing economic activity and increasing unemployment. Therefore, the Fed must carefully balance its actions to promote both stable prices and full employment.

In the Short Run, the Federal Reserve Faces a Tradeoff