Imagine the U.S. government decides to place a temporary stop to printing new currency. Which of the following could be a direct outcome of this action?

The rate of inflation will slow down.
The rate of inflation will speed up.
The Fed will increase interest rates.
The Fed will start buying more bonds.

Question

jeanellaj jeanellaj

15-08-2022
Social Studies

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Imagine the U.S. government decides to place a temporary stop to printing new currency. Which of the following could be a direct outcome of this action?

The rate of inflation will slow down.
The rate of inflation will speed up.
The Fed will increase interest rates.
The Fed will start buying more bonds.

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jaquelinefvr jaquelinefvr · Answer 1 · 2022-08-16T17:45:35+02:00

The correct answer is: The rate of inflation will slow down. The direct result of the action if supposedly the US government decides to temporarily stop printing new currency would be a slowdown in the rate of inflation.

How does the government reduce inflation?

A series of strategic measures is needed to this end. If inflation occurs when in an economy there is more money and credit available than the growth in the production of goods and services, to generate the reduction of inflation, an effective measure would therefore be the balanced reduction of the printing of money.

Therefore, through monetary policy, the government could implement actions that would lead to the control of prices and wages, with a contractionary policy, which generates an increase in interest rates.

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