The Fed usually responds to a recession by:
A)buying short-term government debt from banks.
B)selling short-term government debt to banks.
C)raising interest rates.
D)increasing reserve requirements.

Question

Quizplus · Accepted Answer

Buying short-term government debt from banks, also known as open market operations, injects money into the system and allows banks to lend more, which can stimulate economic activity and help pull the economy out of a recession. Selling short-term government debt to banks would have the opposite effect and could further contract the economy. Raising interest rates and increasing reserve requirements both restrict lending and can worsen a recession.

The Fed Usually Responds to a Recession By