To correct unemployment in the economy, the Federal Reserve might increase.

A. government spending.

B. taxes.

C. the discount rate.

D. the required reserve ratio.

E. the purchase of bonds.

The answer to above question is Option E i.e. the purchase of bonds. One of the primary means the Federal Bank uses to execute an expansionary monetary policy is by "purchasing government bonds from its member banks on the open market". Adding further, the Federal Bank has the power to print notes when the need arises. Monetary policy includes within its purview manipulating the available money supply in the country.The above-mentioned act of the Federal Bank equips the member banks with more money to lend at cheaper costs. . That makes loans for business, automobiles, homes, school, colleges, and other purposes accessible to public at cheap interest rates and in more volume. All of the above-mentioned extra credit boosts consumer spending. And When more business loans are affordable at low rates of interest, companies can expand its operation. For more production, It employs more Capital equipments along with workers whose income rises, allowing them to shop even more. In addition, accessibility to cheap loans boosts the housing industry and personal consumption expenditure. This entire mechanism stimulates demand and progresses economic growth of an economy to a healthy rate.

Option A,and Option B are wrong as government expenditure and taxes falls within the domain of fiscal policy not monetary policy. Option C and Option D are wrong because discount rate and reserve ration are eased (not increased) by the Federal Bank.