When current real output exceeds potential real output,the Fed will _____ interest rates in an effort to fight _____.
A) increase;a recession
B) decrease;a recession
C) decrease;inflation
D) increase;inflation

Question

Quizplus · Accepted Answer

When current real output exceeds potential real output, it indicates an overheating economy, which can lead to inflation. The Fed typically increases interest rates to cool down the economy and control inflation.

When Current Real Output Exceeds Potential Real Output,the Fed Will