Question

If the Fed shifts to a more restrictive monetary policy in order to help control inflation, the policy shift will generally

Answer 1

A more restrictive monetary policy by the Fed helps control inflation by tightening the supply of money and credit in the economy, which leads to a lower price level and lower real GDP in the short run.

Step-by-step explanation:

A more restrictive monetary policy by the Fed helps control inflation. In this policy shift, the Fed tightens the supply of money and credit in the economy, which raises interest rates and discourages borrowing for investment and consumption. This results in a lower price level and lower real GDP in the short run.