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.

Question

Business

Ellen Knight

23 November, 20:55

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.

+2

Answers (2)

Know the Answer?

Phoebe Huff · Answer 1

The economy is expanding and inflation is a concern

Tucker Downs · Answer 2

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.