Question

Vhat monetary policies should the Federal Reserve enact to combat higher inflation rates or consumer goods and services? (1 point)
Enact contractionary monetary policies to decrease the money supply.
• Enact expansionary monetary policies to decrease the money supply.
• Enact expansionary monetary policies to increase the money supply.
Enact contractionary monetary policies to increase money supply.

Answer 1

Enact contractionary monetary policies to decrease the money supply.

Explanation: To fight high inflation the Fed tightens policy—raising interest rates, selling government securities, and/or raising reserve requirements—to reduce aggregate demand and inflation.