Which of the following policies can be adopted by the Fed in order to stimulate an economy in the short run?
A)Increase the market interest rate
B)Purchase U.S.government securities
C)Increase the discount rate
D)Increase the price of consumer goods
E)Increase the required reserve ratio

Question

Quizplus · Accepted Answer

Purchasing U.S. government securities injects money into the economy, which can stimulate economic growth in the short run. Increasing the market interest rate (A), increasing the discount rate (C), and increasing the required reserve ratio (E) all have the potential to slow down economic activity by reducing the amount of money available to borrowers. Increasing the price of consumer goods (D) is not a policy that can be directly controlled by the Fed.

Which of the Following Policies Can Be Adopted by the Fed