The major problem facing the economy is high unemployment and weak economic growth. The inflation rate is low and stable. Therefore, the Federal Reserve decides to pursue a policy to increase the rate of economic growth. Which policy changes by the Fed would reinforce each other to achieve that objective?

Question

Quizplus · Accepted Answer

Buying government securities increases the money supply, which can lower interest rates and stimulate economic growth. Lowering the interest rate paid on excess reserves encourages banks to lend more, further promoting economic growth.

The Major Problem Facing the Economy Is High Unemployment and Weak