Which of the following would cause the Fed to raise interest rates even though the rate of inflation is equal to the target rate?
A)An increase in household wealth
B)An increase in potential GDP
C)An increase in imports
D)A reduction in government purchases
E)A reduction in business confidence

Question

Quizplus · Accepted Answer

An increase in household wealth can lead to higher spending, potentially overheating the economy. To prevent this, the Fed might raise interest rates to cool down economic activity and maintain inflation at the target rate, even if inflation is currently at that target.

Which of the Following Would Cause the Fed to Raise