Asked by Linda MyPhuong on Jun 10, 2024
Verified
During the course of a bad recession the Fed would probably be doing each of the following,except
A) selling securities on the open market.
B) lowering interest rates.
C) lowering reserve requirements.
D) lowering the discount rate.
Open Market
A freely competitive market in which any buyer or seller can participate, and prices are determined by supply and demand.
Interest Rates
The cost of borrowing money, typically expressed as a percentage of the principal, which lenders charge borrowers for the use of their money.
Reserve Requirements
Regulations set by central banks determining the minimum amount of reserves that banks must hold against deposits.
- Understand the mechanisms through which the Federal Reserve controls the money supply.
- Understand the different tools of monetary policy, including open market operations, the discount rate, and reserve requirements.
Verified Answer
DP
Dhwani PawarJun 12, 2024
Final Answer :
A
Explanation :
During a bad recession, the Fed would typically be buying securities on the open market to increase the money supply and stimulate the economy. Selling securities on the open market would have the opposite effect and would not be a typical action taken by the Fed during a recession. Lowering interest rates, reserve requirements, and the discount rate are all actions the Fed would typically take during a recession to encourage banks to lend and stimulate economic growth.
Learning Objectives
- Understand the mechanisms through which the Federal Reserve controls the money supply.
- Understand the different tools of monetary policy, including open market operations, the discount rate, and reserve requirements.