Question

Can the Fed Prevent U.S. Recessions?

Yes. The Fed has the power to reduce market interest rates and can therefore encourage more borrowing and spending. In this way, it stimulates the economy.

Counter-Point

No. When the economy is weak, individuals and firms are unwilling to borrow regardless of the interest rate. Thus borrowing (by those who are qualified) and spending will not be influenced by the Fed’s actions. The Fed should not intervene but rather allow the economy to work itself out of a recession.

Who Is Correct? Use the Internet to learn more about this issue and then formulate your own opinion.

Answer 1

FED( Federal reserve) : It is the central banking system of the USA.

No , the fed cannot prevent US recessions.

Though fed has the power to reduce market interest rates but in case of recession the individuals are not willing to spend and borrow because due to recession, the unemployment increases, people do not have a penny to make a living and in case of recession how can they borrow money . Even if the interest rates are low , people are never going to borrow because they will pind it difficult to repay.

So lowering interest rates cannot prevent recession.

In order to prevent recession, it is important to provide employment to the people and make things in the market affordable so that everybody can buy accordingly. But this not in the hands of fed, hence we can say that fed cannot prevent the recession.

However government can help in dealing with the recession.