In Order to Combat Inflation,the Fed Will ________ the Federal

question 29

Multiple Choice

In order to combat inflation,the Fed will ________ the federal funds rate thereby ________ the quantity of money.

• A) raise; increase
• B) lower; increase
• C) raise; decrease
• D) lower; decrease

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Definitions:

Federal Reserve

The central banking system of the United States, responsible for implementing the country's monetary policy.

Money Supply

The entire amount of financial assets existing in an economy at a certain time.

Inflation

A widespread inflation of prices leading to a diminished ability to purchase with money.

Short-run Phillips Curve

A graphical representation showing an inverse relationship between the rate of inflation and the rate of unemployment in an economy over the short term.