Which statement best describes how the fed responds to recessions?

it sells more securities.

it charges banks more interest.

it increases reserve requirements.

it increases the money supply.

d

Which statement best describes how the Fed responds to recessions?

Explanation:

The recession refers to the time of the economic cycle in which there is a negative growth in the economy. Normally, this economic setback is accompanied by an increase in unemployment and inflation rates. A country is considered to be in recession when its gross domestic product falls for at least three consecutive quarters.  

Recessions often lead to a decrease in consumption, investment and the production of goods and services. This, in turn, causes workers to be laid off and, therefore, increases unemployment.

It is also very common for inflation to fall in recessions due to the drop in consumption. In many cases deflation can occur, the quality can be dangerous if you enter a deflationary spiral. When, on the contrary, high inflation occurs during a recession, it is known as stagflation. Stagflation causes the impoverishment of the population and hinders the exit from the recession. In other words, it makes it more difficult for governments and central banks to take effective measures to correct the situation.

One of the main causes of the recession is usually the overproduction that occurred in previous years when there is economic growth and rising prices. The price increase is mainly in raw materials, stock indices and housing. This price increase leads many people to borrow by taking advantage of this economic boom, causing, later, the slowdown in the economy is stronger and the economy falls into recession.

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