Suppose that several European countries enter a recession decreasing U.S.exports.To move U.S.GDP back to potential GDP,the Fed should

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Lowering the federal funds rate would make borrowing cheaper, encouraging businesses and consumers to spend and invest, thus increasing demand for goods and services and potentially increasing exports. This would help move U.S. GDP back to potential GDP. Increasing or decreasing the government's budget deficit would have an impact on the economy, but it may not necessarily address the decrease in exports caused by the recession in European countries. Raising the federal funds rate would make borrowing more expensive, which could further decrease expenditures and potentially worsen the situation.

Suppose That Several European Countries Enter a Recession Decreasing U