Question

If the economy is in a recession, the central bank could do all of the following except:

(a) Lower taxes
(b) Lower the discount rate
(c) Lower the funds rate
(d) Buy securities

Answer 1

The central bank cannot (a) lower taxes during a recession.

Step-by-step explanation:

The correct answer is (a) Lower taxes. When the economy is in a recession, the central bank can use various tools to stimulate the economy.

These tools include lowering the discount rate, lowering the funds rate, and buying securities.

However, lowering taxes is not a tool that the central bank directly controls.

It is typically a fiscal policy measure implemented by the government to stimulate economic activity during a recession.