If the Fed is concerned about inflation,its actions ________ long-term interest rates so that investment ________ and net exports ________.
A)lower;increases;increase
B)lower;increases;decrease
C)raise;decreases;decrease
D)lower;decreases;decrease
E)raise;increases;increase

Question

Quizplus · Accepted Answer

If the Fed is concerned about inflation, it will raise interest rates (not lower as in choices A and D) to decrease investment (not increase as in choices A and B) and net exports (not increase as in choice A). This is because higher interest rates make borrowing more expensive, leading to less investment spending, and also increase the value of the dollar relative to other currencies, making exports more expensive and reducing net exports.

If the Fed Is Concerned About Inflation,its Actions ________ Long-Term