Which of the following describes the chain of events the Fed uses to fight recession?

Question

Quizplus · Accepted Answer

To fight recession, the Fed typically lowers the federal funds rate target, which reduces the cost of borrowing and stimulates spending and investment. The Fed also buys government securities to increase reserves and encourage lending, which further increases aggregate demand. This process is known as expansionary monetary policy, and it is designed to counteract the effects of a recession. Option A is incorrect because selling government securities would reduce reserves and lending, which would worsen the recession. Option B is also incorrect because it involves raising the federal funds rate target, which would further tighten credit conditions and exacerbate the recession. Option D is incorrect because decreasing reserves and loans would again worsen the recession.

Which of the Following Describes the Chain of Events the Fed