If there is a recession, the Fed would most likely:
A) increase bank reserves by raising the discount rate.
B) increase bank reserves by buying government securities.
C) decrease bank reserves by raising the discount rate.
D) decrease bank reserves by selling government securities.

Question

Quizplus · Accepted Answer

During a recession, the Fed usually implements expansionary monetary policy to stimulate the economy. This involves increasing the money supply by buying government securities from banks, which increases their reserves and encourages them to lend more money. Therefore, the Fed would most likely increase bank reserves by buying government securities.

If There Is a Recession, the Fed Would Most Likely