To try to eliminate a recessionary gap the Fed typically__________ the money supply,and to try to eliminate an inflationary gap the Fed typically __________ the money supply.
A) increases; decreases
B) increases; increases
C) decreases; increases
D) decreases; decreases

Question

Quizplus · Accepted Answer

To combat a recessionary gap, the Fed increases the money supply to stimulate economic activity. To address an inflationary gap, it decreases the money supply to slow down the economy and reduce inflation.

To Try to Eliminate a Recessionary Gap the Fed Typically__________