If the Fed wanted to institute a more expansionary monetary policy, which of the following would it be most likely to do?
A) reduce taxes
B) increase government expenditures
C) buy government bonds from the public
D) raise the discount rate

Question

Quizplus · Accepted Answer

If the Fed wanted to implement a more expansionary monetary policy, it would be most likely to buy government bonds from the public, which increases the money supply in the economy. This action decreases the interest rates and encourages borrowing and spending, which stimulates economic growth. This process is a part of the open market operations that the Fed uses to control the money supply. The other options listed, such as reducing taxes or increasing government expenditures, are fiscal policies, which fall under the scope of the government rather than the central bank. Raising the discount rate would be a contractionary monetary policy because it makes borrowing more expensive and reduces the money supply in the economy.

If the Fed Wanted to Institute a More Expansionary Monetary