Which of the following describes what the Fed would do to pursue an expansionary monetary policy?
A)use open market operations to buy Treasury bills
B)use open market operations to sell Treasury bills
C)use discount policy to raise the discount rate
D)raise the reserve requirement

Question

Quizplus · Accepted Answer

The Fed can pursue an expansionary monetary policy by increasing the money supply, which can be done through open market operations. Buying Treasury bills from banks and other financial institutions will inject new money into the economy and increase the availability of credit. This can stimulate economic growth, encourage investment and consumer spending, and help to address recessionary conditions. Selling Treasury bills would have the opposite effect and would be associated with a contractionary monetary policy. Discount policy and reserve requirements are other tools that the Fed can use to influence monetary policy, but these are not typically used in pursuit of an expansionary policy.

Which of the Following Describes What the Fed Would Do