Final answer:
To combat inflation, the Federal Reserve is likely to implement a contractionary monetary policy, which usually involves increasing interest rates to control the money supply and reduce consumer and business spending.
Step-by-step explanation:
When the Federal Reserve (Fed) is concerned about inflation, it is likely to adopt a contractionary monetary policy. This typically involves raising interest rates to reduce borrowing and spending, ultimately leading to a decrease in the money supply and curbing inflation. If the inflation rate goes above the target, which has been indicated by figures like Ben Bernanke as around 2%, the Fed will raise the federal funds rate. This action increases the cost of borrowing and encourages saving over spending, thus reducing the aggregate demand and ultimately, the inflation rate. The Fed's response to high inflation takes into account historical contexts and various macroeconomic factors that are key indicators of inflationary pressures on the economy.