Which of these would the Federal Reserve consider doing if it wanted to attempt to keep inflation in control?

A) print more money

B) raise interest rates

C) allow more people to borrow more money

D) isolate the country from international trade

Answer:C

The correct answer is B. If the Federal Reserve wanted to attempt to keep inflation in control, it would raise interest rates.

Explanation:

Inflation is the monetary phenomenon by which money loses value, that is, more monetary units are needed to acquire certain products (for example, if a product that cost $ 100 in 2019 happens to cost $ 150 in 2020, there was an inflation rate of 50% in that period).

Inflation is caused by many very different factors, but one of them is the over-abundant supply of money in the hands of society, that is, the excess liquidity in the hands of buyers. Therefore, one of the ways to curb inflation is by removing money from the market, so that it is more scarce and therefore prices tend to remain stable.

In turn, one of the ways to restrict the supply of money is through the rise in interest rates, since the greater interest offered by banks, more people will be tempted to deposit their money in fixed terms, with which will have less monetary liquidity, thus removing money from circulation.