Which of the following actions is most likely to be taken by the Federal Reserve System in periods of rising inflation?

Question

Quizplus · Accepted Answer

In periods of rising inflation, the Federal Reserve System is most likely to take action by reducing the rate of growth in the amount of money in circulation to slow down spending and reduce demand-pull inflation. This is known as a contractionary or tight-money policy. Pursuing an easy-money policy (A) or expanding the rate of growth of the money supply (E) would likely fuel inflation even further. Reducing interest rates (B) and inducing spending and investment (C) are actions that are taken in periods of low economic growth to stimulate the economy and would not be effective in reducing inflation.

Which of the Following Actions Is Most Likely to Be