which statements describe how the fed responds to high inflation? check all that apply. it charges banks…

which statements describe how the fed responds to high inflation? check all that apply. it charges banks more interest. it pays banks less interest. it sells more securities. it decreases the money supply. it increases the money supply.

which statements describe how the fed responds to high inflation? check all that apply. it charges banks more interest. it pays banks less interest. it sells more securities. it decreases the money supply. it increases the money supply.

Answer

Brief Explanations:

When the Federal Reserve (Fed) wants to combat high - inflation, it uses contractionary monetary policy. Charging banks more interest (raising the discount rate) makes borrowing more expensive for banks, reducing the amount of money they can lend out and thus decreasing the money supply. Selling more securities (open - market operations) takes money out of the banking system, also decreasing the money supply. Paying banks less interest is not a typical tool for fighting inflation. Increasing the money supply would exacerbate inflation, not reduce it.

Answer:

It charges banks more interest. It sells more securities. It decreases the money supply.