If the Fed fears an economic downturn, it would be most likely to
A) buy additional bonds in order to reduce the federal funds rate.
B) buy additional bonds in order to increase the federal funds rate.
C) sell additional bonds in order to increase the federal funds rate.
D) sell additional bonds in order to reduce the federal funds rate.

Question

Quizplus · Accepted Answer

When the Fed fears an economic downturn, it typically buys additional bonds to inject liquidity into the economy, which lowers the federal funds rate and encourages borrowing and spending.

If the Fed Fears an Economic Downturn, It Would Be