The Fed can engage in preemptive strikes against a rise in inflation by ________ the federal funds interest rate;it can act preemptively against negative demand shocks by ________ the federal funds interest rate.
A)raising;lowering
B)raising;raising
C)lowering;lowering
D)lowering;raising

Question

Quizplus · Accepted Answer

The Fed can engage in preemptive strikes against a rise in inflation by raising the federal funds interest rate as it would make borrowing more expensive and restrain demand. It can also act preemptively against negative demand shocks by lowering the federal funds interest rate as it would make borrowing cheaper and stimulate demand.

The Fed Can Engage in Preemptive Strikes Against a Rise