If Congress cuts spending to balance the federal budget, the Fed can act to prevent unemployment and recession by
A)buying bonds to increase the money supply
B)buying bonds to decrease the money supply.
C)selling bonds to increase the money supply.
D)selling bonds to decrease the money supply.

Question

Quizplus · Accepted Answer

If Congress cuts spending, it will likely lead to decreased economic activity and potentially, higher unemployment. To counteract this, the Fed can purchase government bonds which increases the money supply and lowers interest rates. This can stimulate economic growth and prevent a recession.

If Congress Cuts Spending to Balance the Federal Budget, the Fed