In a recession,the Fed's monetary policy aims to ________ the real interest rate,________ aggregate demand,and ________ aggregate supply.
A)increase;decrease;not change.
B)decrease;increase;not change
C)increase;not change;increase
D)decrease;increase;increase
E)increase;increase;increase

Question

Quizplus · Accepted Answer

During a recession, the Fed aims to decrease the real interest rate to encourage borrowing and investment, which in turn increases aggregate demand. Increasing aggregate supply is typically not a priority during a recession, therefore the answer is not C, D, or E. Choice A is incorrect because increasing the real interest rate would discourage borrowing and investment, which would not help to stimulate the economy during a recession.

In a Recession,the Fed's Monetary Policy Aims to ________ the Real