Which of the following policies could the Fed use to lower the interest rate?
A) A tax cut.
B) Selling government securities.
C) Raising the discount rate.
D) Reducing the required reserve ratio.

Question

Quizplus · Accepted Answer

Reducing the required reserve ratio would increase the amount of funds that banks have available to lend to customers, which would increase the supply of loanable funds and lower the interest rate. A tax cut would increase aggregate demand and potentially raise the interest rate, selling government securities would reduce the money supply and potentially raise the interest rate, and raising the discount rate would increase the cost of borrowing for banks and potentially raise the interest rate.

Which of the Following Policies Could the Fed Use to Lower