Question

To run an expansionary monetary policy, the Federal Reserve needs to

	sell bonds
	purchase bonds

Answer 1

Option 2

purchase bonds

Monetary policy is a policy used by the central bank of a country to stabilize the economy. It uses the money supply to control the economy. An expansionary policy increases money supply while the economy in recession or high unemployment. It uses purchase bonds to increase the money supply.

A purchase bond sends money in the economy and take the documents of bonds from banks or public and increases the money supply

A sell of bonds takes money from the economy and provide bonds so the money supply decreases.