When inflation rises above its target rate, the Federal Reserve will:
A)increase taxes.
B)place a ceiling on interest rates.
C)raise interest rates.
D)lower interest rates.

Question

Quizplus · Accepted Answer

When inflation rises above its target rate, the Federal Reserve will raise interest rates in order to reduce the money supply and slow down spending. This works to bring prices back down to a more stable level. A, B, and D are not appropriate responses in this situation.

When Inflation Rises Above Its Target Rate, the Federal Reserve