2. The Federal Reserve is looking over economic data from this past quarter. Their goal is for inflation to be at 2% and GDP growth to be around 4%. After looking at the economic
indicators they learn that inflation is at 5% and GDP growth is at 6%. What action should
the FED take with their monetary policy? (Hint: Figure out whether they need to with
inflation, and if what they need GDP to do)
2. Lower interest rates and buy government securities to bring down inflation and slow
down the economy.
b. Raise interest rates and sell government securities to bring down inflation and slow down
the economy
c. Raise interest rates and lower the reserve ratio to speed up the economy.
d. Lower taxes and increase spending.