Question

Suppose the Federal Reserve decides to decrease the money supply in order to lower inflation. In three or four sentences, explain if this is an expansionary or contractionary policy.

Answer 1

Answer:

At such high inflation rates, the economy tends to break down. ... The Federal Reserve seeks to control inflation by influencing interest rates. When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down.

Explanation:

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