Use the Following to Answer Questions

Multiple Choice

Use the following to answer questions .
Exhibit: The Money Supply and Aggregate Demand
-(Exhibit The Money Supply and Aggregate Demand) If the economy is experiencing a recessionary gap, the Fed would

A) sell government bonds, which would decrease the money supply and increase interest rates. The results of such a policy are represented in Panel (b) .
B) buy government bonds, which would decrease the money supply and decrease interest rates. The results of such a policy are represented in Panel (a) .
C) buy government bonds, which would increase the money supply and decrease interest rates. The results of such a policy are represented in Panel (a) .
D) sell government bonds, which would increase the money supply and decrease interest rates. The results of such a policy are represented in Panel (a) .