The Federal Reserve fights inflation via open market operations, the supply of loanable funds curve shifts and the aggregate demand curve shifts .

Question

Quizplus · Accepted Answer

When the Federal Reserve fights inflation, it typically sells government securities in open market operations, which decreases the money supply. This causes the supply of loanable funds curve to shift leftward, leading to higher interest rates. Higher interest rates reduce investment and consumer spending, causing the aggregate demand curve to shift leftward.

The Federal Reserve Fights Inflation Via Open Market Operations, the Supply