If the Fed Reduces the Money Supply to Reduce Inflation

question 253

Multiple Choice

If the Fed reduces the money supply to reduce inflation, a floating exchange rate will aid the Fed in fighting inflation because

• A) as the money supply is decreased, the interest rate will increase, and the price of U.S. exports will fall and the price of U.S. imports will rise.
• B) as the money supply is decreased, the interest rate will increase, and the price of U.S. exports will rise and the price of U.S. imports will fall.
• C) as the money supply is decreased, the interest rate will increase, and the price of both U.S. exports and U.S. imports will rise.
• D) as the money supply is decreased, the interest rate will increase, and the price of U.S. exports and U.S. imports will fall.

---

Definitions:

Livestock

Domesticated animals raised in an agricultural setting to produce commodities such as food, fiber, and labor.

Farm Animals

Animals that are domesticated and raised on farms to create products like food, fiber, and provide labor.

Flu

Also known as influenza, a contagious respiratory illness caused by influenza viruses, leading to symptoms like fever, cough, and body aches.

World's Population

The total number of humans currently living on Earth.