Question

9. Stabilization Suppose the US educational system improves, making workers more productive. If the federal reserve is trying to stabilize the price level in response, they should A. do nothing, because prices will not change anyhow. B. do nothing, because prices cannot be prevented from changing in the long run C. sell bonds in open market operations. D. lower the reserve requirement. E. increase the discount rate F. Raise taxes. G. Increase government spending.

Answer 1

d

Step-by-step explanation:

If workers become more productive, the supply curve shifts rightward. As a result prices would fall. In a bid to stabilise price, the federal reserve would conduct an expansionary monetary policy to increase money supply in the economy

Expansionary monetary policy : these are polices taken in order to increase money supply. When money supply increases, aggregate demand increases. reducing reserve requirement and open market purchase are ways of carrying out expansionary monetary policy

Increasing discount rate and selling bonds are examples of contractionary monetary policies. Contractionary monetary policy : these are policies taken to reduce money supply.

Raising tax is an example of contractionary fiscal policy

Increasing government spending is an example of expansionary fiscal policy