The Federal Reserve Bank can ____________ and the government can ___________ to stimulate aggregate demand in the economy.

Question

Quizplus · Accepted Answer

When the Federal Reserve Bank lowers interest rates, it encourages borrowing and spending, which can stimulate aggregate demand. Similarly, when the government increases spending, it can directly increase aggregate demand. Decreasing government spending can have the opposite effect, reducing aggregate demand. Therefore, option A is the correct choice.

The Federal Reserve Bank Can ____________ and the Government Can