What monetary policies should the federal reserves and neck to combat higher inflation rates for consumer goods and services?
A) enact contradictory monetary policies to decrease the money supply
B) enact, expansionary monetary policy is to decrease the money supply
C) an act expansionary monetary policies, to increase the money supply
D) enact contradictory monetary policies, to increase the money supply
B) enact expansionary monetary policies to decrease the money supply.
To combat higher inflation rates for consumer goods and services, the Federal Reserve can implement contractionary monetary policies. These policies aim to decrease the money supply in the economy. This would help to reduce aggregate demand, which can help to lower the prices of goods and services. Therefore, the correct option is:
B) Enact contractionary monetary policies to decrease the money supply.
To combat higher inflation rates for consumer goods and services, the Federal Reserve can implement certain monetary policies. Let's examine the options provided:
A) Enact contradictory monetary policies to decrease the money supply: This option suggests implementing policies that contradict each other to combat inflation. However, decreasing the money supply in response to high inflation may not be the most effective approach.
B) Enact expansionary monetary policies to decrease the money supply: Expansionary monetary policies are typically used to stimulate economic growth. They involve increasing the money supply by lowering interest rates and implementing measures to encourage borrowing and spending. Using expansionary policies to combat inflation by decreasing the money supply would be contradictory and unlikely to yield the desired results.
C) Enact expansionary monetary policies to increase the money supply: This option suggests implementing expansionary monetary policies to counter high inflation rates. By increasing the money supply, the goal is to stimulate spending and economic growth, which can help alleviate inflationary pressures. This approach is generally more effective when dealing with inflation.
D) Enact contradictory monetary policies to increase the money supply: Similar to option A, using contradicting policies to increase the money supply may not be the most appropriate response to combat inflation. It could have unintended consequences and exacerbate the inflation problem.
In conclusion, the most suitable option would be C) enact expansionary monetary policies to increase the money supply as a means to combat higher inflation rates for consumer goods and services.