When the Fed Believes That Inflation Is a Problem, It

question 39

Multiple Choice

When the Fed believes that inflation is a problem, it will use _____ policy to decrease the money supply and raise interest rates.

• A) inflation policy
• B) contractionary policy
• C) deflation policy
• D) recession policy

---

Definitions:

Long Run

A period in which all factors of production and costs are variable, allowing full adjustment to changes.

Demand Equals

A state in a market where the quantity of a good or service desired by buyers is equal to the quantity supplied by sellers, resulting in market equilibrium.

Marginal Cost

The added expenditure resulting from creating an additional product or service unit.

Long Run

A period of time in which all factors of production and costs are variable, allowing all inputs to be adjusted.