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Answer the following Essential Question: If the Federal Reserve opined that the economy needed a moderate...

Answer the following Essential Question:


If the Federal Reserve opined that the economy needed a moderate stimulus what action would you recommend it take?...


(please give details and examples )

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Answer #1

If Federal Reserve is of the opinion that economy needed a moderate stimulus then it will have to adopt the quantitative easing policy to a moderate level because quantitative easing policy would be focused upon cutting off the interest rates and it would also lower the Reserve requirement of the bank and it will also mean that the Federal Reserve will be engaging into open market operations in order to stimulate the level of demand into the economy.

It can be exampled through the Federal Reserve meetings in which it can set its interest rates to lower levels in order to inflate the demand and it will also reduce the Reserve requirement of the bank because bank will be having higher amount to lend then and it will be leading to fueling of credit and growth in the economy leading to generation of the demand.

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