To fight inflation, the Federal Reserve should conduct _____ monetary policy to _____ interest rates, which will shift the aggregate demand curve to the _____.

Question

Quizplus · Accepted Answer

Contractionary monetary policy involves raising interest rates, which decreases borrowing and spending, thus decreasing aggregate demand. Shifting the aggregate demand curve to the left is the desired outcome to combat inflation, as it slows down economic growth and reduces pressure on prices.

To Fight Inflation, the Federal Reserve Should Conduct _____ Monetary