Which of the following monetary policies would be appropriate to close a recessionary gap?
A)A tax cut
B)A decrease in government purchases
C)An increase in reserve requirements
D)The Fed's purchase of U.S.government securities
E)The Fed's raising the discount rate

Question

Quizplus · Accepted Answer

The Fed's purchase of U.S. government securities would increase the money supply and lower interest rates, which would encourage investment and borrowing, and ultimately boost aggregate demand and output.

Which of the Following Monetary Policies Would Be Appropriate to Close