The Federal Reserve will tend to tighten monetary policy when
A)interest rates are rising too rapidly.
B)it thinks the unemployment rate is too high.
C)the growth rate of real GDP is quite sluggish.
D)it thinks inflation is too high today,or will become too high in the future.

Question

Quizplus · Accepted Answer

The Federal Reserve will tend to tighten monetary policy when it thinks inflation is too high today, or will become too high in the future. This is because the main responsibility of the Federal Reserve is to maintain price stability by keeping inflation low and stable. Tightening monetary policy can help slow down the economy and prevent inflation from getting out of control. The other three options are not necessarily reasons to tighten monetary policy. Rising interest rates could be a sign of a healthy economy, a high unemployment rate is a concern for the Federal Reserve, and sluggish growth could prompt the Federal Reserve to ease monetary policy rather than tighten it.

The Federal Reserve Will Tend to Tighten Monetary Policy When