To fight a recession, an appropriate monetary policy would be that the Fed conducts an open market operation that ________ government securities, ________ the federal funds rate, and ________ aggregate demand.
A) sells; raises; increases
B) sells; raises; decreases
C) buys; lowers; increases
D) buys; lowers; decreases
E) sells; lowers; increases

Question

Quizplus · Accepted Answer

To fight a recession, the Fed needs to increase aggregate demand, and buying government securities will inject money into the economy, which will increase aggregate demand. Lowering the federal funds rate will make borrowing cheaper for banks, which can then lend more to consumers and businesses, also increasing aggregate demand.

To Fight a Recession, an Appropriate Monetary Policy Would Be