The Fed's countercyclical policy tools to eliminate a recession include lowering:
A) the discount rate, raising the Fed funds rate, and selling government bonds on the open market.
B) the required reserve ratio, raising the discount rate, and selling government bonds on the open market.
C) the required reserve ratio, raising the discount rate, and buying government bonds on the open market.
D) the required reserve ratio, lowering the discount rate, and buying government bonds on the open market.

Question

Quizplus · Accepted Answer

The Fed's countercyclical policy tools include lowering the required reserve ratio, lowering the discount rate, and buying government bonds on the open market. Lowering the required reserve ratio increases the amount of money banks can lend, lowering the discount rate encourages borrowing, and buying government bonds on the open market increases the money supply. All of these measures work to stimulate economic growth and reduce the likelihood of a recession.

The Fed's Countercyclical Policy Tools to Eliminate a Recession Include