This channel answers questions you’ve always wanted to ask about money and economics. Topics include recessions, inflation, electronic trading, exchange rates and more.
When recession hits, the Fed can lower interest rates in order to encourage people to borrow money and make purchases. This works in the short run, but it has to be handled carefully so that inflation isn't impacted in the long run.
The Fed has to carefully balance the short term goals of increasing output and employment with the long term goals of maintaining low inflation.