The Federal Reserve wishes to decrease unemployment in the United States. What would be an appropriate...
The Federal Reserve wishes to decrease unemployment in the United States. What would be an appropriate policy?
sell government bonds on the open market
increase reserve requirement
buy government bonds on the open market
increase the discount rate
Homework Answers
Answer
Option 3
buy government bonds on the open market
==
To reduce the unemployment the Fed needs to implement an expansionary fiscal policy that buys bonds or decreases reserve requirement or decreases the discount rate and so.
The expansionary policy increases the money supply which decreases interest rate and increases investment spending which increases aggregate demand and decreases unemployment in the economy.
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