When output is above potential GDP with inflation pressure, the Fed sh…

Question

When output is above potential GDP with inflation pressure, the Fed should use:

Accepted Answer

D. Contractionary policy

1. Higher rates cut investment and consumer borrowing.
2. Contractionary policy shifts aggregate demand left.
3. Output returns to potential GDP.
_Source: OpenStax Principles of Macroeconomics for AP Courses 2e, Chapter 14, Monetary Policy and Bank Regulation (CC BY 4.0)._

Answer

Expansionary policy

Answer

Deposit insurance

Answer

Bank supervision

When output is above potential GDP with inflation pressure, the Fed should use:

Keep practising Monetary Policy and Bank Regulation