Question

What monetary policies should the Federal Reserve enact to combat higher inflation rates for consumer goods and services?(1 point)

Enact contractionary monetary policies to decrease the money supply.

Enact contractionary monetary policies to increase money supply.

Enact expansionary monetary policies to decrease the money supply.

Enact expansionary monetary policies to increase the money supply.

Answer 1

The policy the Federal Reserve should enact to combat higher inflation rates for consumer goods and services is contractionary monetary policies to decrease the money supply.

What is a contractionary monetary policy?

Monetary policy are policies taken by the central bank of a country to affect the level of money supply. Contractionary monetary policy are policies taken to reduce money supply. When money supply decreases, aggregate demand falls and inflation slows.

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