Asked by
Rowena Herrera
on Nov 11, 2024Verified
Which of the following monetary policies would be appropriate to close a recessionary gap?
A) A tax cut
B) A decrease in government purchases
C) An increase in reserve requirements
D) The Fed's purchase of U.S.government securities
E) The Fed's raising the discount rate
Recessionary Gap
The difference between the real GDP and the potential GDP of an economy, indicating a situation where resources are underutilized.
Monetary Policies
Actions undertaken by a central bank, currency board, or other regulatory committees to control the supply of money and achieve economic goals such as controlling inflation or encouraging economic growth.
Reserve Requirements
Regulations set by central banks determining the minimum amount of reserves a bank must hold against deposits, used as a tool for controlling the money supply.
- Assess the effectiveness of monetary policy in closing recessionary and inflationary gaps.
Verified Answer
EA
Learning Objectives
- Assess the effectiveness of monetary policy in closing recessionary and inflationary gaps.