The correct Federal Reserve policy tools to counteract demand-pull inflation are:
A) buy securities on the open market, raise the reserve requirement, raise the discount rate.
B) sell securities on the open market, raise the reserve requirement, raise the discount rate.
C) buy securities on the open market, lower the reserve requirement, lower the discount rate.
D) sell securities on the open market, lower the reserve requirement, lower the discount rate.

Question

Quizplus · Accepted Answer

To counteract demand-pull inflation, the Federal Reserve would sell securities on the open market, raise the reserve requirement, and raise the discount rate. These actions are designed to decrease the money supply and increase interest rates, which can help cool down an overheating economy.

The Correct Federal Reserve Policy Tools to Counteract Demand-Pull Inflation