Question

On March 15, 2017, Federal Reserve Chairman Janet L. Yellen announced the Federal Reserve was raising its benchmark rate (the federal funds rate) by a quarter of a percentage point (to a range of 0.75-1.00 percent). This was the third time the Fed has raised rates after the Great Recession. Image result for fed will raise rates Consider the aggregate demand-aggregate supply diagram below, which represents the macroeconomy. Suppose the market is initially at an equilibrium at point A. What effect will the Fed's actions have on this economy?

Question 16 (1 point) Saved On March 15, 2017, Federal Reserve Chairman Janet L. Yellen announced the Federal Reserve was raising its benchmark Consider the aggregate demand aggregate supply diagram below, which represents the macroeconomy. Suppose the market is initially at an equilibrium at point A. What effect will the Fed's actions have on this economy? LRAS: SRAS Price level (GDP deflator 2009 = 100) AD: GDP GDP: Real GDP (trillions of 2009 dollars) The rate of economic growth will increase. Unemployment will decrease. The inflation rate will decrease. Employment will increase.

Answer 1

An increase in the Federal fund rate in the market will shift the AD Curve to the left as the moneys supply will decrease and interest rate will rise, the answer is "C"

this will decrease the inflation in the market as the interest rate has increased.