Question

What monetary policies should the Federal Reserve enact to combat higher inflation rates for consumer goods and services?(1 point)
Responses

Enact expansionary monetary policies to increase the money supply.
Enact expansionary monetary policies to increase the money supply.

Enact contractionary monetary policies to increase money supply.
Enact contractionary monetary policies to increase money supply.

Enact contractionary monetary policies to decrease the money supply.
Enact contractionary monetary policies to decrease the money supply.

Enact expansionary monetary policies to decrease the money supply.

Answer 1

To combat higher inflation rates for consumer goods and services, the Federal Reserve should enact contractionary monetary policies to decrease the money supply. This approach generally involves raising interest rates and reducing the quantity of money circulating in the economy, which can help slow down inflation by reducing consumer spending and borrowing.

So the correct response is:

**Enact contractionary monetary policies to decrease the money supply.**