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How might the Federal Reserve respond to a slowdown in the economy or recession?

  • Question 4a of 10 - economic policy

  • Maximum Attempts: 1
  • Question Type: Multiple Choice
  • Maximum Score: 1
  • Question: How might the Federal Reserve respond to a slowdown in the economy or recession?
  • Answers:
  1. By buying bonds in the open market
  2. By increasing the discount rate
  3. By selling bonds in the open market
  4. By increasing the reserve requirement

The correct answer is: By buying bonds in the open market. Buying bonds increases the supply of money in the economy, which leads to growth. Selling bonds, increasing the discount rate, and increasing the reserve requirement all decrease the money supply, raise interest rates, and slow the growth of the economy.

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