Which of the following describes what the Fed would do to pursue an expansionary monetary policy? A. use discount policy to raise the discount rate B. use open market operations to buy Treasury bills C. raise the reserve requirement D. use open market operations to sell Treasury bills

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6 February, 15:55

Which of the following describes what the Fed would do to pursue an expansionary monetary policy? A. use discount policy to raise the discount rate B. use open market operations to buy Treasury bills C. raise the reserve requirement D. use open market operations to sell Treasury bills

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Justice Maxwell · Answer 1

Option (B) is correct.

Explanation:

Open market operations is a monetary policy instrument that is used by the Federal reserve for controlling the money supply in an economy. If there is a need to decrease the money supply in an economy then fed sells the government securities to the public and on the other hand if there is a need to increase the money supply in an economy then fed purchases the government securities from the public.

So, here the expansionary policy is to purchases the treasury bills from the public.