Question

Of the following, which are actions most closely associated with countercyclical monetary policy? Select the two correct answers below. Select all that apply: During an economic boom, interest rates should be kept high. When the economy slows down, the federal reserve should buy financial assets from commercial banks. During an economic boom, the supply of loanable funds should be increased. During an economic recession, the interest rate should should be increased.

Answer 1

During an economic boom, interest rates should be kept high.

When the economy slows down, the federal reserve should buy financial assets from commercial banks.

Step-by-step explanation:

Countercyclical monetary policy can be defined as the process of having the Fed move in the opposite direction in response to economic upswing and downturn by boosting employment and output through increased monetary supply. When countercyclical monetary policy is adopted, there are dangers of overreaction.

The actions most closely associated with countercyclical monetary policy are;

- During an economic boom, interest rates should be kept high.

- When the economy slows down, the federal reserve should buy financial assets from commercial banks.