What actions should the Fed take if it believes the economy is about to experience a high rate of inflation? Now, let's assume you are the President of the Fed and you have to make certain decisions in our economy. If the Fed orders a contractionary monetary policy, describe what will happen to the following variables relative to what would have happened without the policy: 

2. The money supply
4. Interest rates
6. Investment
8. Consumption
10. Net Exports
12. The aggregate demand curve
14. Real GDP
16. The price level

Answer rating: 100% (QA)

ANSWER If the Fed believes the economy is about to experience a high rate of inflation it would typically respond by implementing a contractionary mon... View the full answer