With a Large and Growing Deficit, the Fed May Face

question 193

Multiple Choice

With a large and growing deficit, the Fed may face pressure from the government to

• A) decrease the inflation tax.
• B) keep interest rates low, but the Fed risks inflation by doing so.
• C) decrease the quantity of money to keep the value of money high.
• D) increase the velocity of circulation.
• E) increase the quantity of money to prevent inflation.