During a recession, the Federal Reserve may try to lower interest rates by
A) increasing the required reserve ratio.
B) selling government bonds to banks or individuals.
C) buying government bonds from banks or individuals.
D) sending directives to bank officials.

Question

Quizplus · Accepted Answer

The Federal Reserve may try to lower interest rates during a recession by buying government bonds from banks or individuals. This process is known as open market operations and increases the money supply in the economy, which in turn decreases interest rates. Increasing the required reserve ratio, selling government bonds to banks or individuals, or sending directives to bank officials would not have the same effect on lowering interest rates.

During a Recession, the Federal Reserve May Try to Lower