Use the figure below to answer the following question.
Figure 14.3.2
-Refer to Figure 14.3.2.The figure shows the economy of Freezone.Potential GDP is $250 billion. To return the economy to full employment, the central bank can _______ the overnight rate and _______ securities.

Question

Use the figure below to answer the following question.
  Figure 14.3.2
-Refer to Figure 14.3.2.The figure shows the economy of Freezone.Potential GDP is $250 billion. To return the economy to full employment, the central bank can _______ the overnight rate and _______ securities.

Quizplus · Accepted Answer

To stimulate the economy and return it to full employment, the central bank needs to lower the overnight rate to encourage borrowing and investment. It also needs to buy securities to increase the money supply and further stimulate economic activity. Therefore, the best choice is E, lower the overnight rate and buy securities.

Use the Figure Below to Answer the Following Question