Business Finance
Bank Reserve when eceonomy is in recessionary mode

Question Description

I need support with this Business question so I can learn better.

When the economy is in a recessionary mode, what will likely be the actions by the Federal Reserve using monetary policy?

How is the velocity of money related to the level of economic activity

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Final Answer

The US economy is highly influenced by keynsian economics policy, where the govt looks to stimulate the economy by printing more money. The bank reserve will print more money, and send IOU's to the treasury in the form of US bonds.

The velocity of money declines during recession. By printing money and doing  a stimulus plan, the govt hopes to increase the velocity.

Prashant S (1995)
Cornell University

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