Chapter 6R, Problem 7MCQ

To determine

To find:

Action that is required to address inflation by Federal Reserve.

Explanation of Solution

Open market operations are the Fed's first line of defense against inflation. From its member banks, the Fed purchases or sells securities, primarily Treasury notes. When it wishes to have more money to lend, it purchases securities. Such securities, which the banks are compelled to purchase, are sold by it. As a result, the Fed has less cash available to lend. They are able to charge greater interest rates as a result. That curbs inflation while slowing economic development.

Thus, from the above we can conclude that the correct option is A.