Question

If the fed raises the interest​ rate, this will​ ________ inflation and​ ________ real gdp in the short run.

a. ​increase; raise
b. ​reduce; raise
c. ​increase; lower
d. ​reduce; lower

Answer 1

When the Fed raises interest rates it will reduce inflation and lower the GDP in the short term. GDP stands for Gross Domestic Product. The Feds sometimes take this action in an effort to jump start a slow or stagnant economy.