Question

Which of the following actions would the Fed take to fight inflation?


raise taxes


increase government spending


reduce the money supply


increase the money supply

Answer 1

To fight inflation, the Federal Reserve (the Fed) would typically take actions that reduce the money supply. This can be done through several mechanisms, such as increasing interest rates or selling government securities. By reducing the money supply, the Fed aims to decrease consumer spending and investment, which can help lower inflationary pressures.

Therefore, the correct action from the options provided would be:

**reduce the money supply**