To fight a recession,an appropriate monetary policy would be that the Reserve Bank conducts an open market operation that ________ government securities,________ the cash rate,and ________ aggregate demand.

Question

Quizplus · Accepted Answer

To fight a recession, the Reserve Bank needs to inject more money into the economy. To do this, it would conduct an open market operation by buying government securities, which would increase the cash reserves of banks and encourage them to lend more. Lowering the cash rate would also encourage borrowing and spending, further increasing aggregate demand. Therefore, the appropriate monetary policy would be to buy government securities, lower the cash rate, and increase aggregate demand, which is only possible with option B.

To Fight a Recession,an Appropriate Monetary Policy Would Be That