Question

Given that the rate of inflation in a hypothetical economy is projected to be 1.5% in the coming quarter, what is the Federal Reserve likely to do?(1 point)

make efforts to raise the inflation rate because 1.5%
is below the desired rate of inflation

make efforts to lower the inflation rate because 1.5%
is greater than the desired rate of inflation

take no action because 1.5%
is the ideal inflation rate

make efforts to maintain the inflation rate because 1.5%
is the desired rate of inflation

Answer 1

make efforts to raise the inflation rate because 1.5% is below the desired rate of inflation

The Fed’s inflation target is ~2%, so with inflation below target it would likely ease policy (lower rates or other stimulus) to push inflation up.