Sorry, that's incorrect. Buying bonds is easy $($expansionary$)$ monetary policy, appropriate in this case.

Correct Answer:

Buy bonds from banks.

Geoffrey

Let's take another look at this situation. Unemployment is high and spending is low. We want to allow banks to make more loans and therefore create more money through easy $($expansionary$)$ monetary policy.

Should we increase or decrease excess reserves in banks for easy monetary policy?

Increase excess reserves.

Decrease excess reserves.

Submit