In response to an inflationary gap, the Fed
A. waits until the price level falls before acting.
B. lowers the federal funds rate by buying U.S. government securities.
C. raises the federal funds rate by selling U.S. government securities.
D. lowers the federal funds rate by buying U.S. government securities.
Answer:C
In response to an inflationary gap, the Fed
A. waits until the price level falls before acting. B. lowers the federal funds rate by buying U.S. government securities. C. raises the federal funds rate by selling U.S. government securities. D. lowers the federal funds rate by buying U.S. government securities.