Answer:
When there is inflation, there is a large amount of money in circulation, which causes it to lose value and, therefore, a greater amount of money is required to acquire a certain good. Therefore, to curb inflation, it is necessary to decrease the money supply in circulation, that is, withdraw dollars from society and place them in the financial and banking system, to curb consumption and encourage investment.
Therefore, the Federal Reserve must carry out actions aimed at removing this money from circulation, which it can carry out through two fundamental actions: on the one hand, by raising the reserve requirements of banks, with which they can lend less money, thus slowing down monetary circulation; and on the other, raising the interest rate on debt bonds, thus promoting the outflow of money from consumers to the financial market.
