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

Adriana Patrick

2 February, 22:47

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.

+1

Answers (2)

Know the Answer?

Makai Ware · Answer 1

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.

Sarai Prince · Answer 2

The economy is expanding and inflation is a concern