To combat a recession, the Federal Reserve could

Question

Quizplus · Accepted Answer

To combat a recession, the Federal Reserve would aim to increase the money supply and encourage lending and spending. Decreasing the required reserve ratio allows banks to lend more of their deposits, decreasing the discount rate makes it cheaper for banks to borrow money from the Federal Reserve, and buying securities on the open market injects liquidity into the financial system, all of which stimulate economic activity.

To Combat a Recession, the Federal Reserve Could