If the Fed starts on a program of monetary restraint to control inflation, then
A)the growth rate of the United States economy will increase.
B)the dollar could depreciate.
C)prices will rise.
D)real interest rates could rise relative to foreign interest rates.

Question

Quizplus · Accepted Answer

Monetary restraint by the Fed, aimed at controlling inflation, typically involves increasing interest rates. Higher interest rates can attract foreign capital, potentially increasing the value of the dollar and making U.S. assets more attractive. This can lead to a rise in real interest rates relative to those in other countries.

If the Fed Starts on a Program of Monetary Restraint