Scenario 2 Federal Reserve board members are analyzing current economic data to decide monetary policy. Their target
goal for the economy is for the average GDP growth not to exceed 4% and for inflation not to exceed
2%. Economic indicators are showing that the current economy is experiencing an average GDP growth of
4.5% and an inflation rate of 4%.
3. Based on the current economic indicators, which monetary policy tools should the Federal Reserve
(FED) use to reach their goal?
A. Raise interest rates and sell bonds.
B.
Lower interest rates and buy bonds.
C. Raise interest rates and buy bonds
D.
Lower interest rates and sell bonds.
4. In 3-4 sentences use evidence from the text to justify and explain your answer.