The Fed would engage in a(n) _____ if it wanted to close an inflationary gap.

Question

Quizplus · Accepted Answer

The Fed would engage in a contractionary monetary policy if it wanted to close an inflationary gap. This may involve actions such as increasing the interest rate, reducing the money supply, or increasing reserve requirements for banks. These actions would reduce spending and credit availability, which would help to slow down the economy and reduce inflationary pressures.

The Fed Would Engage in A(n) _____ If It Wanted