Suppose that businesses and consumers get much more optimistic about the future of the economy.To stabilize output the Federal Reserve could
A)buy bonds to raise interest rates.
B)buy bonds to lower interest rates.
C)sell bonds to raise interest rates.
D)sell bonds to lower interest rates.

Question

Quizplus · Accepted Answer

To stabilize output when optimism increases, the Fed could sell bonds to raise interest rates, which would help cool down potential overheating in the economy.

Suppose That Businesses and Consumers Get Much More Optimistic About