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15 July, 02:45

Which of these situations is most likely to cause the Fed to introduce a tight money supply?

The federal government passes a new budget with a large deficit.

The economy is expanding quickly and inflation is a concern.

The economy is prosperous with relatively low inflation and low unemployment.

A recession has reduced aggregate demand and increased unemployment.

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Answers (2)
  1. 15 July, 03:13
    0
    Answer: The correct answer is : The economy is prosperous with relatively low inflation and low unemployment.

    Explanation: Generally when things are going well and the unemployment rate is at a minimum of 50 years, the Fed increases interest rates as a defense against inflation. But the Fed changed its strategy because inflation remains below the target, unemployment is low and the economy is growing at a reasonable rate.
  2. 15 July, 03:23
    0
    The economy is expanding and inflation is a concern
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