ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The Fed has several monetary policy tools it can use to fight off a recession. It can lower interest rates to spark demand and increase the amount of money in circulation via open market operations (OMO), including quantitative easing (QE), through which additional types of assets may be purchased by the Fed.

Detailed explanation-2: -Stimulating Expansionary Monetary Policies. The central bank will often use policy to stimulate the economy during a recession or in anticipation of a recession. Expanding the money supply is meant to result in lower interest rates and borrowing costs, with the goal to boost consumption and investment.

Detailed explanation-3: -Expansionary fiscal policy increases the level of aggregate demand, either through increases in government spending or through reductions in taxes. Expansionary fiscal policy is most appropriate when an economy is in recession and producing below its potential GDP.

Detailed explanation-4: -The Federal Reserve’s expansionary monetary policy often takes a three-pronged approach: Lowering interest rates. Reducing the reserve requirement (the amount of cash banks must keep on hand) Buying back government securities.