The economy is experiencing a low rate of economic growth and the Fed decides to pursue an expansionary money policy. Which set of actions by the Fed would be most consistent with this policy?
a. Buying government securities and lowering the discount rate
b. Selling government securities and raising the discount rate
c. Buying government securities and raising the discount rate
d. Selling government securities and lowering the discount rate
a. Buying government securities and lowering the discount rate
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Why do private markets fail to account for externalities?
a) The government can easily correct any adverse effect on the market that externalities may cause. b) Externalities don't occur in private markets. c) Decision makers in the market fail to take into account the external effects of their behaviour. d) Sellers include costs associated with externalities in the price of their products.
Explain the economic concept of opportunity cost
What will be an ideal response?