Use the figure below to answer the following question.

Figure 30.3.2
-Refer to Figure 30.3.2. 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.
A)lower; sell
B)raise; sell
C)raise; buy
D)lower; buy
E)lower; not change its holdings of

Question

Use the figure below to answer the following question.
  
Figure 30.3.2
-Refer to Figure 30.3.2. 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.
A)lower; sell 
B)raise; sell 
C)raise; buy 
D)lower; buy 
E)lower; not change its holdings of

Quizplus · Accepted Answer

To return the economy to full employment, the central bank needs to stimulate the economy. This means that it needs to lower the overnight rate to encourage borrowing and investment. Additionally, it needs to buy securities to inject liquidity into the economy and lower interest rates further. Therefore, the best choice is to lower the overnight rate and buy securities, which is option D.

Use the Figure Below to Answer the Following Question