When Fed policy is being used to offset an inflationary gap, which of the following variables increases as a result?
A)Aggregate demand.
B)Investment.
C)Net Exports.
D)Interest rates.

Question

When Fed policy is being used to offset an inflationary gap, which of the following variables increases as a result?​
A)​Aggregate demand.
B)​Investment.
C)​Net Exports.
D)​Interest rates.

Quizplus · Accepted Answer

When Fed policy is being used to offset an inflationary gap, the goal is to decrease aggregate demand, which can be achieved by increasing interest rates. Therefore, the correct answer is D, interest rates.

When Fed Policy Is Being Used to Offset an Inflationary