If the Federal Reserve wished to engage in expansionary monetary policy it could

Question

Quizplus · Accepted Answer

If the Federal Reserve wishes to engage in expansionary monetary policy, it would purchase government debt. This would inject more money into the economy, making it easier for banks to lend and encouraging spending and investment. Raising the primary credit rate or reserve ratio would have the opposite effect by making borrowing more expensive and reducing the amount of money available for lending. Selling government debt would also have a contractionary effect by reducing the amount of money in circulation.

If the Federal Reserve Wished to Engage in Expansionary Monetary