If the Fed wants to close a contractionary gap,it might
A)increase government spending
B)increase taxes
C)decrease taxes
D)sell U.S.government bonds to banks
E)lower the discount rate

Question

Quizplus · Accepted Answer

The Fed can lower the discount rate to make it cheaper for banks to borrow money. This will increase the money supply and lead to lower interest rates, which will encourage businesses to invest and consumers to spend.

If the Fed Wants to Close a Contractionary Gap,it Might