During a recession, the Federal Reserve may try to lower interest rates by

Question

Quizplus · Accepted Answer

During a recession, the Federal Reserve may try to lower interest rates by buying government bonds from banks or individuals. This process is called open market operations, and it involves the Fed purchasing government bonds from banks and other financial institutions. This injection of cash into the banking system can then be used to make loans to individuals and businesses, stimulating economic activity and lowering interest rates. Increasing the required reserve ratio would have the opposite effect, as it would require banks to hold onto more of their funds and reduce their lending activity. Selling government bonds would also have the opposite effect, as it would decrease the amount of available funds in the banking system and raise interest rates. Sending directives to bank officials would not be a direct way to lower interest rates.

During a Recession, the Federal Reserve May Try to Lower