Which statement best describes how the Fed responds to high inflation?

A. It charges banks more interest.

B. It pays banks less interest.

C. It sells more securities.

D. It decreases the money supply.

The correct answer is A. If the federal government charges banks more interest, banks will then also have to increase their interest. This will deter people from borrowing money from banks, which will decrease spending, which will cause prices to drop, which will ultimately slow inflation.