If the economy is in a recession, the Fed is likely to:
A) buy bonds through open market operations.
B) increase the discount rate.
C) increase the reserve requirement.
D) decrease taxes.

Question

Quizplus · Accepted Answer

Buying bonds through open market operations injects money into the economy and decreases interest rates, which can stimulate borrowing and spending and potentially help to pull the economy out of a recession. The other options listed would likely have a contractionary effect on the economy and potentially deepen the recession.

If the Economy Is in a Recession, the Fed Is