In a period of low inflation and economic recession, the Federal Reserve is expected to take which of the following actions?

In a period of low inflation and economic recession, the Federal Reserve typically takes actions aimed at stimulating economic activity. Buying bonds in the open market is one of the primary tools used in monetary policy to achieve this goal.

When the Federal Reserve purchases bonds, it injects liquidity into the banking system, increasing the money supply. This action encourages lending and investment by making it easier for banks to have access to funds. Lower interest rates generally follow as the increased supply of money tends to push down the cost of borrowing. The goal of this strategy is to foster spending by consumers and businesses, which can help lift the economy out of recession.

In contrast, increasing reserve requirements, raising interest rates, or selling government securities would generally have the opposite effect. These measures are aimed at tightening the money supply and controlling inflation rather than stimulating economic growth.