If the Fed wished to decrease GDP, it could
A) increase the reserve requirement or conduct an open market sale.
B) increase the reserve requirement or conduct an open market purchase.
C) decrease the reserve requirement or conduct an open market sale.
D) decrease the reserve requirement or conduct an open market purchase.

Question

Quizplus · Accepted Answer

Increasing the reserve requirement or conducting an open market sale are actions that would decrease the money supply in the economy. A reduced money supply typically leads to higher interest rates, which can decrease investment and spending, thereby reducing GDP.

If the Fed Wished to Decrease GDP, It Could