Given a recessionary gap, the Federal Reserve will use monetary policy to _____ real GDP and _____ aggregate demand.

Question

Quizplus · Accepted Answer

In order to close a recessionary gap, the Federal Reserve will use expansionary monetary policy which involves increasing the money supply and lowering interest rates. This will increase investment and consumption spending, ultimately increasing aggregate demand and real GDP.

Given a Recessionary Gap, the Federal Reserve Will Use Monetary