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Suppose​ that, in the United​ States, the inflation rate is at 3.2 percent​ (the target inflation...

Suppose​ that, in the United​ States, the inflation rate is at 3.2 percent​ (the target inflation rate is 2​ percent). Rapidly rising prices and low interest rates have spurred business to hire more workers and invest in new facilities.

Given the​ circumstances, the countercyclical monetary policy adopted by the Federal Reserve is likely to result in​ a(n)

▼

a. increase in federal funds rate

b. decrease ins Reserve requirement

c. expansion of access to credit

Would countercyclical policy still be enacted if central bankers were appointed by popular​ vote?

a. yes

b. no

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Answer #1

Correct answer:

A

With increase in FFR, household and firms will be discouraged in their consumption and investment. It will reduce price level and inflation will be controlled.

------

Correct Answer:

Yes

Central bank will take decisions for the best interest of the economy. So, they will take the right decision for economy.

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