How does the Fed respond to recessions?

What actions does the Federal Reserve take during a recession?

During a recession, the Federal Reserve typically lowers interest rates to stimulate economic activity and encourage borrowing.

How does lowering interest rates help the economy?

Lowering interest rates makes loans cheaper, which encourages businesses to invest and consumers to spend, boosting economic growth.

Are there any risks associated with these actions?

Yes, prolonged low interest rates can lead to inflation and asset bubbles, which may create instability in the economy.

What other tools does the Fed use besides interest rate changes?

The Fed also uses quantitative easing, which involves purchasing government securities to increase money supply and lower long-term interest rates.