SIE practice questionmediumExpansionary Monetary Policy
During a recession, the Federal Reserve would MOST likely take which of the following actions?
- AIncrease reserve requirements
- BRaise the discount rate
- CSell government securities in open market operations
- DBuy government securities in open market operations✓ Correct answer
Explanation
Why D — Buy government securities in open market operations
During a recession, the Fed typically uses expansionary policy. Buying government securities injects money into the banking system, while selling securities, raising the discount rate, or increasing reserve requirements are contractionary actions.
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