Which action by the Federal Reserve would most likely lead to an increase in economic activity?
Understand the Problem
The question is asking which action by the Federal Reserve would stimulate economic activity. This involves understanding how the Federal Reserve's monetary policy tools (federal funds rate, open market operations, reserve requirements, and discount rate) impact the economy.
Answer
Buying government securities.
The Federal Reserve buying government securities would likely increase economic activity. This increases bank reserves, expands the money supply, and lowers interest rates, stimulating the economy.
Answer for screen readers
The Federal Reserve buying government securities would likely increase economic activity. This increases bank reserves, expands the money supply, and lowers interest rates, stimulating the economy.
More Information
The Federal Reserve System is the central bank of the United States. It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system.
Tips
A common mistake is thinking that raising interest rates increases economic activity; it actually slows it down.
Sources
- Expert-Verified Answer - brainly.com
- Monetary Policy: What Are Its Goals? How Does It Work? - federalreserve.gov
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