Economic Growth More Rapid Than Predicted" Fearing Instability, Fed Raises Interest Rates "Banks Protest Increased Discount Rate" What monetary policy strategy of the Federal Reserve do these headlines reflect? ANSWER: B
The correct answer is Decreasing the money supply to slow the economy. Raising interest rates and the discount rate are all monetary tools aimed at decreasing the money supply in the economy. The Fed uses these tools to reign in on rapid growth in money supply and prevent inflation and overheating of the economy.
