The Fed raised interest rates in 2004 and 2005.This implies,other things the same,that the Fed
A)increased the money supply because it was concerned about unemployment.
B)increased the money supply because it was concerned about inflation.
C)decreased the money supply because it was concerned about unemployment.
D)decreased the money supply because it was concerned about inflation.

Question

Quizplus · Accepted Answer

When the Fed raises interest rates, it typically does so to combat inflation by decreasing the money supply. This is because higher interest rates make borrowing more expensive, which in turn can slow down economic growth and decrease demand for goods and services, thus reducing inflationary pressure. The Fed is less likely to raise interest rates to address unemployment concerns, as this could potentially harm overall economic growth and employment levels.

The Fed Raised Interest Rates in 2004 and 2005