Which of the following statements is most correct if the Fed sees no need to engage in expansionary monetary policy? ?

Question

Which of the following statements is most correct if the Fed sees no need to engage in expansionary monetary policy? ?

Quizplus · Accepted Answer

If the Fed sees no need for expansionary monetary policy, it will likely not continue to purchase securities to increase its balance sheet. Instead, it may allow securities to expire and gradually reduce the size of its balance sheet. Therefore, option B is the most correct statement. Option A is incorrect because if the Fed is not engaging in expansionary policy, there is no need to rapidly shrink its balance sheet. Option C is incorrect because the Fed does have the ability to shrink its balance sheet. Option D is incorrect because if the Fed is not engaging in expansionary policy, it will not increase the size of its balance sheet.

Which of the Following Statements Is Most Correct If the Fed