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Exhibit: The Money Supply and Aggregate Demand
-(Exhibit The Money Supply and Aggregate Demand) If the economy is experiencing a recessionary gap, the Fed would

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Use the following to answer questions .
Exhibit: The Money Supply and Aggregate Demand 
-(Exhibit The Money Supply and Aggregate Demand) If the economy is experiencing a recessionary gap, the Fed would

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In a recessionary gap, there is a decrease in aggregate demand, resulting in low production and high unemployment. To address this, the Fed can use expansionary monetary policy by increasing the money supply, which will lower interest rates and increase investment and consumer spending. Buying government bonds increases the money supply, and therefore, the correct choice is option C.

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