Figure 15-14
-Refer to Figure 15-14.In the figure above,if the economy in Year 1 is at point A and expected in Year 2 to be at point B,then the appropriate monetary policy by the Federal Reserve would be to
A)lower interest rates.
B)raise interest rates.
C)lower income taxes.
D)raise income taxes.

Question

Figure 15-14 
-Refer to Figure 15-14.In the figure above,if the economy in Year 1 is at point A and expected in Year 2 to be at point B,then the appropriate monetary policy by the Federal Reserve would be to
A)lower interest rates. 
B)raise interest rates. 
C)lower income taxes. 
D)raise income taxes.

Quizplus · Accepted Answer

If the economy is expected to be at point B in Year 2, it means there is an upward pressure on inflation. In order to combat this, the Federal Reserve should raise interest rates to reduce spending and investment, which will in turn help to moderate inflation.

Figure 15-14 -Refer to Figure 15-14.In the Figure Above,if the Economy in the Economy