If the economy is near full employment and Congress cuts taxes, the proper monetary policy should be

Question

Quizplus · Accepted Answer

When the economy is near full employment and Congress cuts taxes, there is a risk of increasing demand and leading to inflation. In order to counteract this, the Federal Reserve should pursue a contractionary monetary policy, such as increasing interest rates or reducing the money supply, to decrease aggregate demand and prevent inflation.

If the Economy Is near Full Employment and Congress Cuts