Question

Assume a country's banking system has limited reserves. To counter a recession, the central bank might pursue

which of the following actions?
(A) Increasing reserve requirements and selling securities on the open market
(B) Increasing capital gains tax and selling securities on the open market
(C) Decreasing reserve requirements and increasing the discount rate
(D) Decreasing the discount rate and buying securities on the open market
(E) Decreasing the capital gains tax and selling securities on the open market

Answer 1

Answer: Government spending is less than tax revenue, and the central bank increases the money supply.

G

Government spending is greater than tax revenue, and the central bank keeps the money supply constant.

Government spending is greater than tax revenue, and the central bank increases the money supply.

Government spending is greater than tax revenue, and the central bank decreases the money supply.

Government spending is less than tax revenue, and the central bank keeps the money supply constant.

Step-by-step explanation: