Economics Semester Exam

Question

26 of 3126 of 31 Items

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 typically involves raising interest rates and selling government securities to reduce the amount of money circulating in the economy, which can help to lower inflation.

So the correct response is: Enact contractionary monetary policies to decrease the money supply.