Which of the following strategies does monetary policy dictate in inflationary periods?

Question

Quizplus · Accepted Answer

Inflationary periods refer to periods of high inflation rates, where the general price level of goods and services in an economy is rising rapidly. In such scenarios, monetary policy dictates that the central bank, which in the case of the US is the Federal Reserve, should raise interest rates. Higher interest rates make it more expensive for consumers and businesses to borrow money, which reduces spending and slows down the economy. This, in turn, can help to temper inflationary pressures. Therefore, choice E - The Federal Reserve should raise interest rates - is the best option.

Which of the Following Strategies Does Monetary Policy Dictate in Inflationary