Question

Q:
What type of policy does the Fed use to counteract a contraction?

A:
1. О fiscal policy
2. policy lags
3. expansionary monetary policy
4. contractionary monetary policy

Answer 1

Answer:

3. expansionary monetary policy

Explanation:

To help accomplish this during recessions, the Fed employs various monetary policy tools in order to suppress unemployment rates and re-inflate prices. These tools include open market asset purchases, reserve regulation, discount lending, and forward guidance to manage market expectations.