Assume that the U.S. economy just entered into a recession. What can the Federal Reserve do to try to get the economy out of a recession? Among other comments that you may make, please be sure to discuss the following:
Describe the role of the Federal Open Market Committee of the Federal Reserve in the United States, and describe the tools available to the Federal Reserve to influence the nation’s money supply.
Discuss the Federal Reserve’s open-market operations, and the importance of its role. How does another key central bank around the world conduct such operations, and why are they important? What recent open-market operations have the Federal Reserve and another country’s central bank taken?
Explain what happens to the U.S. money supply when the Federal Reserve buys and sells Treasury bonds. Describe in detail how this has affected U.S. banks’ abilities to lend and the overall U.S. economy.
Explain what has happened to the U.S. money supply and economy when another central bank outside the United States has bought and sold U.S. Treasury bonds.
