If the Fed uses a passive monetary policy during weak economic conditions,
A)it increases the money supply substantially.
B)it reduces the money supply substantially.
C)it allows the economy to fix itself.
D)it purchases commercial paper and mortgage-backed securities.

Question

Quizplus · Accepted Answer

A passive monetary policy during weak economic conditions means the Federal Reserve (the Fed) does not actively intervene to stimulate or slow down the economy. Instead, it allows market forces to correct the economic situation over time, implying it lets the economy fix itself rather than taking substantial actions to increase or decrease the money supply or purchasing specific securities.

If the Fed Uses a Passive Monetary Policy During Weak