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MMLU / Congress has embarked on another round of expansionary fiscal policy to boost…

Problem

Answer published by the source. Consult the official source to check your work against its answer.

question

Congress has embarked on another round of expansionary fiscal policy to boost employment and get reelected. As chair of the central bank how would you reduce the "crowding-out" effect and what macroeconomic problem might your policy exacerbate?

choices

  1. Increase the reserve ratio risking the devaluation of the dollar
  2. Sell government securities risking inflation
  3. Buy government securities risking a recessionary gap
  4. Lower the discount rate risking inflation

subject

high_school_macroeconomics

Discussion

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Source and history

Official source

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