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DURING A RECESSION, WHAT IS THE MAIN ACTION THE FEDERAL REACTION WILL TAKE?

DURING A RECESSION, WHAT IS THE MAIN ACTION THE FEDERAL REACTION WILL TAKE?

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Answer #1

Federal Reserve Bank which is the Central Bank of India states of America mainly focuses on monetary policy on the basis of two types of policies.

1.expansionary monetary policy

2.contractionary monetary policy.

During a recession, the Federal Reserve Bank by its federal market operation performs expansionary monetary policy.

The government focus on lowering the interest rate, federal funds rate so that money supply can be increased and can be used for general purpose and for more Investments.

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