If saving exceeds investment, the appropriate countercyclical monetary policy would be:
A)an increase in the reserve requirement.
B)a cut in the discount rate.
C)an open market sale of government bonds.
D)an increase in the federal funds rate.

Question

Quizplus · Accepted Answer

When saving exceeds investment, it indicates a lack of spending in the economy which can lead to a slowdown. A cut in the discount rate is a countercyclical monetary policy aimed at encouraging banks to borrow more from the central bank, thereby increasing the money supply, encouraging investment and spending, and stimulating the economy.

If Saving Exceeds Investment, the Appropriate Countercyclical Monetary Policy Would