If the Fed wants to "prick" an asset-pricing bubble driven by a credit boom,what is the primary tool for accomplishing this?
A) Raising interest rates
B) Lowering interest rates
C) Increasing reserve requirements
D) Taking a short position in the overpriced asset

Question

Quizplus · Accepted Answer

When the Fed raises interest rates, it becomes more expensive to borrow money. This can cool down a credit boom and reduce demand for assets driven by credit, which can ultimately prick an asset-pricing bubble.

If the Fed Wants to "Prick" an Asset-Pricing Bubble Driven