Question

If the Federal Reserve wanted to moderately stimulate the economy what action would it take?

Answer 1

In order to moderately stimulate the economy, the Federal first needs to reduce the interest rate at low level so that the individual start taking loans to start their business, build homes, thereby increasing the inflation and employment. For example- Due to Covid 19 pandemic, the Fed reserve has recently kept the interest at very low level in the range of 0 to 0.25% to stimulate the economic and increase the consumption levels. Therefore, Quantivative easing or the accomodative monetary policy helps stimulate the economy.