Figure 15-13
-Refer to Figure 15-13.In the figure above,if the economy in Year 1 is at point A and is expected in Year 2 to be at point B,then the appropriate monetary policy by the Federal Reserve would be to
A)lower interest rates.
B)raise interest rates.
C)lower income taxes.
D)raise income taxes.

Question

Figure 15-13 
-Refer to Figure 15-13.In the figure above,if the economy in Year 1 is at point A and is expected in Year 2 to be at point B,then the appropriate monetary policy by the Federal Reserve would be to
A)lower interest rates. 
B)raise interest rates. 
C)lower income taxes. 
D)raise income taxes.

Quizplus · Accepted Answer

If the economy is expected to move from point A to point B, which indicates an increase in inflation and output, the Federal Reserve would need to implement a contractionary monetary policy, such as raising interest rates, to slow down the growth and keep inflation at bay. Lowering income taxes would be a fiscal policy measure, which is outside of the Federal Reserve's authority.

Figure 15-13 -Refer to Figure 15-13.In the Figure Above,if the Economy in the Economy