In response to the persistence of recessionary gaps,some central banks have engaged in unconventional monetary policies such as
A) increasing deposit insurance.
B) reducing the velocity of money.
C) increasing open-market operations.
D) credit easing.
E) fractional-reserve banking.

Question

Quizplus · Accepted Answer

Credit easing is an example of unconventional monetary policy used by central banks during recessionary gaps. This policy involves the central bank purchasing private sector assets in order to increase the supply of credit and support the economy. This is done in addition to the traditional open-market operations where the central bank buys and sells government securities in order to influence interest rates. The other options listed, increasing deposit insurance, reducing the velocity of money, and fractional-reserve banking, are not examples of unconventional monetary policies aimed at combating recessionary gaps. Increasing open-market operations is a traditional monetary policy conducted by central banks, but not necessarily unconventional.

In Response to the Persistence of Recessionary Gaps,some Central Banks