When the Federal Reserve acts to tighten money and credit in the economy, it is trying to reduce
A) the unemployment rate.
B) the inﬂation rate.
C) the target federal funds rate.
D) the discount rate.

Question

Quizplus · Accepted Answer

When the Federal Reserve tightens money and credit, it is trying to reduce the inflation rate by making it more difficult for individuals and businesses to borrow money and therefore reducing overall spending in the economy. This can also lead to higher unemployment rates in the short term as businesses cut back on hiring and investment due to higher borrowing costs. However, the primary goal is to stabilize prices and prevent runaway inflation.

When the Federal Reserve Acts to Tighten Money and Credit