The Fed's attempt to reduce inflation may have a negative short-run impact of
A)increased unemployment and reduced growth.
B)reduced output growth and higher inflation.
C)lower inflation and higher employment.
D)lower productivity and lower employment.

Question

Quizplus · Accepted Answer

When the Fed attempts to reduce inflation, it often does so by raising interest rates. This can lead to decreased borrowing and spending by individuals and businesses, which in turn can lead to reduced economic growth and job creation. This may ultimately result in increased unemployment and reduced growth in the short-term.

The Fed's Attempt to Reduce Inflation May Have a Negative