If the economy is in a recession, the Fed might:

Question

Quizplus · Accepted Answer

During a recession, the Fed may choose to increase the money supply in the economy to encourage spending and stimulate growth. One way to do this is through open market operations, which involves buying government bonds from banks, thereby increasing banks' reserves and encouraging lending. This can lead to increased spending in the economy and help boost economic growth. Therefore, the best choice is A. The other options are not necessarily effective during a recession. Decreasing taxes may not lead to increased spending if consumers and businesses are still feeling uncertain about the future, while increasing the discount rate and reserve requirements could potentially reduce the amount of lending in the economy, further exacerbating the recession.

If the Economy Is in a Recession, the Fed Might