To fight a recession,the Reserve Bank can

Question

Quizplus · Accepted Answer

Lowering the cash rate by buying securities and increasing the supply of reserves is known as expansionary monetary policy. This will encourage borrowing and spending, which can help stimulate economic growth and combat a recession. Selling securities and decreasing the supply of reserves (option A) would have the opposite effect and likely make a recession worse. Raising the cash rate (options C and D) would also likely slow economic growth and worsen a recession. Lowering income taxes on interest income (option E) would have some impact on consumer spending, but it would not be as direct or effective as expansionary monetary policy.

To Fight a Recession,the Reserve Bank Can