To slow down a high inflation rate,the Fed should use a(n)______________ monetary policy by using open market _____________.
A) expansionary;purchases
B) restrictive;sales
C) expansionary;sales
D) restrictive;purchases

Question

Quizplus · Accepted Answer

To slow down a high inflation rate, the Fed should use a restrictive monetary policy by using open market sales. This means that the Fed would sell securities in the open market, thereby decreasing the money supply, increasing interest rates, and reducing aggregate demand, leading to a slowdown in inflation. Expansionary monetary policy, using open market purchases, would have the opposite effect, increasing the money supply, lowering interest rates, and stimulating aggregate demand, which would only exacerbate inflation.

To Slow Down a High Inflation Rate,the Fed Should Use