When the Federal Reserve wants to slow inflation, it
A)cuts the federal funds rate target aggressively to almost zero.
B)increases taxes on interest income.
C)raises the federal funds rate target.
D)lowers the federal funds rate.
E)increases aggregate income, output, and employment.

Question

Quizplus · Accepted Answer

Raising the federal funds rate target makes borrowing more expensive, which can reduce spending and investment, thereby slowing down inflation.

When the Federal Reserve Wants to Slow Inflation, It