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3. If Inflation becomes more serious in the U.S. economy after the pandemic, should the Fed...

3. If Inflation becomes more serious in the U.S. economy after the pandemic, should the Fed start a restrictive monetary policy to control inflation? Why or why not? A reference link (URL) to an article that supports your answer will be a plus.

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If Inflation is more serious in U.S. economy, Fed should adopt restrictice / contractionary monetary policy such that it reduce money supply in the economy. Reduction in money supply will reduce cash holdings which tends to reduce willingness to pay for goods by people and eventually reduce aggregate demand. Reduction in aggregate demand will shift demand curve to its left from AD to AD1 thereby lowering the average price level from P To P1 which control inflation rate.

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