Question

If inflation begins to rise rapidly, which step is the Federal Reserve likely to take?

Decrease the federal funds rate.

Increase the reserve requirement.

Buy government securities.

Decrease the discount rate.

Answer 1

If inflation is running high, the Fed will raise interest rates, sell bonds on the open market, and raise the reserve ratio. The Fed very rarely raises the reserve ratio

Answer 2

Thank you!!

Answer 3

Anytime.