Exhibit 15-4
-In Exhibit 15-4,the Fed can return the economy to its potential output by
A)selling US Treasury securities inthe open market
B)lowering the discount rate
C)by lowering the reserve requirenment
D)buying US Treasury securities in the open market
E)printing money

Question

Exhibit 15-4 
-In Exhibit 15-4,the Fed can return the economy to its potential output by
A)selling US Treasury securities inthe open market 
B)lowering the discount rate 
C)by lowering the reserve requirenment 
D)buying US Treasury securities in the open market 
E)printing money

Quizplus · Accepted Answer

Buying US Treasury securities in the open market increases the money supply and lowers interest rates, which can stimulate investment and consumption, therefore returning the economy to its potential output. Selling US Treasury securities, lowering the discount rate, lowering the reserve requirement, and printing money can also affect the money supply and interest rates, but their effectiveness may depend on the specific circumstances of the economy and the Fed's goals.

Exhibit 15-4 -In Exhibit 15-4,the Fed Can Return the Economy to Its