Questions: Imagine the following: New sources of energy have become marketable and the industries involved have hired thousands to operate the emergence of new businesses. Construction companies cannot build homes fast enough for workers in the energy industry. Due to increasing salaries in several other industries that partner with energy companies, the demand for everything from food to entertainment to travel has increased. High demand has brought about shortages in some product categories. To help manage the situation in the short term, Multiple Choice Congress will likely decrease taxes. Congress will likely enact monetary policy. the Fed will likely decrease interest rates. the Fed will likely increase interest rates

The answer is the Fed will likely increase interest rates.

Decreasing taxes is typically a fiscal policy tool used to stimulate economic growth by increasing disposable income for consumers and businesses. However, in this scenario, the economy is already experiencing high demand and shortages, which suggests that it is overheating. Decreasing taxes would likely exacerbate the situation by further increasing demand.

Monetary policy is typically the domain of the Federal Reserve (the Fed), not Congress. Congress is more involved in fiscal policy, such as taxation and government spending. Therefore, this option is not applicable.

Decreasing interest rates is a monetary policy tool used to stimulate economic growth by making borrowing cheaper, which encourages spending and investment. However, in this scenario, the economy is already experiencing high demand and shortages, indicating that it is overheating. Decreasing interest rates would likely worsen the situation by further increasing demand.

Increasing interest rates is a monetary policy tool used to cool down an overheating economy by making borrowing more expensive, which can help reduce spending and investment. In this scenario, where there is high demand and shortages, increasing interest rates would help manage the situation by curbing excessive demand and helping to stabilize prices.