Question

Suppose that the economy is currently experiencing a recession and the Federal Funds rate is already at 0%. Discuss and explain at least 4 specific countercyclical options available to the a. Federal Reserve Bank b. Federal government

Answer 1

For the federal reserve the 4 specific countercyclical options are:

1. The first one is the lending from the discount window.

2. The second one is the easing of the quantitative.

3. The third one is the change in the interest rate that is to be paid on the reserve that was deposited by the federal reserves.

4. Finally, the fourth one is the change in the requirement of the reserves.

For the federal government

1. To raise the interest rates.

2. To stabilize the pricing of the products.

3. Reduction in the unemployment rate.

4. Better utilization of the resources.