The Fed controls GDP
A) directly through government spending.
B) indirectly through the foreign exchange market.
C) indirectly through the money supply.
D) directly through price indexing.
E) indirectly through tax collections.

Question

Quizplus · Accepted Answer

The Fed can indirectly control GDP through the money supply. By adjusting interest rates and injecting money into the economy or withdrawing money from it, the Fed can influence consumer and business spending, which in turn can impact the overall level of economic growth (GDP). However, the Fed does not directly control GDP through government spending, the foreign exchange market, price indexing, or tax collections.

The Fed Controls GDP