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: -When inflation is too low, the Federal Reserve typically lowers interest rates to stimulate the economy and move inflation higher.

Detailed explanation-3: -It is the Federal Reserve’s actions, as a central bank, to achieve three goals specified by Congress: maximum employment, stable prices, and moderate long-term interest rates in the United States (figure 3.1).

Detailed explanation-4: -One way through which the Federal Reserve can slow down the economy when it’s growing too quickly is through open market operations. In the open market, the Federal Reserve can sell more government bonds, resulting in reduced money supply within the economy, thus driving up the interest rates.