According to the political business cycle theory, if the Fed wanted to see a President re-elected, prior to the election it might
A)lower the discount rate and sell bonds.
B)lower the discount rate and buy bonds.
C)raise the discount rate and sell bonds.
D)raise the discount rate and buy bonds.

Question

Quizplus · Accepted Answer

The political business cycle theory suggests that policymakers (like the Fed) might manipulate economic conditions to influence electoral outcomes. Lowering the discount rate and buying bonds would stimulate the economy by making borrowing cheaper and increasing the money supply, potentially improving economic conditions and public sentiment before an election, which could help the incumbent president's chances of re-election.

According to the Political Business Cycle Theory, If the Fed