Which monetary policy would be appropriate to close a contractionary gap?
A)a tax cut
B)a decrease in government purchases
C)an increase in reserve requirements
D)the Fed's purchase of U.S.government securities
E)the Fed's raising the discount rate

Question

Quizplus · Accepted Answer

The Fed's purchase of U.S. government securities is an expansionary monetary policy that would increase the money supply, lower interest rates, and stimulate spending and investment, ultimately closing the contractionary gap.

Which Monetary Policy Would Be Appropriate to Close a Contractionary