When there is a threat of inflation in the economy,the Fed can ________ the federal funds rate so as to ________ aggregate demand and ________ the price level.
A)lower;increase;decrease
B)raise;decrease;increase
C)lower;increase;increase
D)raise;decrease;decrease
E)raise;increase;decrease

Question

Quizplus · Accepted Answer

Raising the federal funds rate makes borrowing more expensive, which decreases aggregate demand and helps to decrease the price level, countering inflation.

When There Is a Threat of Inflation in the Economy,the