In the short run, the Fed's actions to fight an inflationary gap shift the
A) aggregate demand curve rightward.
B) aggregate demand curve leftward.
C) short-run aggregate supply curve rightward.
D) short-run aggregate supply curve leftward.

Question

Quizplus · Accepted Answer

To combat an inflationary gap, the Federal Reserve (Fed) would typically increase interest rates or use other contractionary monetary policies. These actions would decrease overall spending in the economy, leading to a leftward shift of the aggregate demand curve.

In the Short Run, the Fed's Actions to Fight an Inflationary