Capital MarketsQuestion 331 of 398
If the Federal Reserve wants to stimulate a slowing economy, which action would it most likely take?
a.Buy government securities in the open market to lower interest rates and expand the money supply
b.Sell government securities to raise interest rates
c.Increase the reserve requirement for banks
d.Raise the discount rate sharply
Explanation
To stimulate a slowing economy, the Fed pursues expansionary (easing) policy, typically buying government securities in open market operations. This adds reserves to the banking system, lowers short-term interest rates, and encourages borrowing and spending.
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