When the Federal Reserve wants to stimulate the economy, it is likely to

Question

Quizplus · Accepted Answer

When the Federal Reserve wants to stimulate the economy, it is likely to conduct expansionary monetary policy. One of the ways it can do this is by buying government bonds from banks and other businesses. This increases the money supply in the economy, which can stimulate borrowing and spending, ultimately leading to economic growth. Increasing the reserve requirement or discount rate, or increasing margin requirements, would have the opposite effect of reducing the money supply and slowing down the economy. Prohibiting borrowing from commercial banks is not a common tool of the Federal Reserve.

When the Federal Reserve Wants to Stimulate the Economy, It