The Fed hopes to impact short-run inflation and output by altering:
A) the production function.
B) aggregate supply.
C) aggregate demand.
D) fiscal policy.

Question

Quizplus · Accepted Answer

The Fed can impact short-run inflation and output by altering aggregate demand through monetary policy tools such as changing interest rates or the money supply. This can affect consumer and business spending, as well as investment decisions, ultimately impacting overall demand in the economy. Additionally, altering aggregate supply or the production function would typically require longer-term structural changes rather than short-term adjustments. Fiscal policy is typically controlled by the government, rather than the Fed.

The Fed Hopes to Impact Short-Run Inflation and Output by Altering