What could the Fed do to offset an unexpected increase in aggregate demand?
A)It could lower the discount rate.
B)It could raise interest rates.
C)It could lower reserve requirements.
D)It could reduce aggregate demand by buying securities in the open market.

Question

Quizplus · Accepted Answer

Raising interest rates is a monetary policy tool used by the Federal Reserve to cool down an overheating economy by making borrowing more expensive, which can help offset an unexpected increase in aggregate demand.

What Could the Fed Do to Offset an Unexpected Increase