If the Fed wished to eliminate an inflationary gap, which of the following would be an appropriate policy?

Question

Quizplus · Accepted Answer

In order to eliminate an inflationary gap, the Fed would need to reduce the amount of spending in the economy. This can be done by raising interest rates, which makes borrowing more expensive and reduces consumer and business spending. Therefore, the appropriate policy to eliminate an inflationary gap is to raise the federal funds rate (choice D).

If the Fed Wished to Eliminate an Inflationary Gap, Which