Praxis II: Economics Content Knowledge Exam Prep

Answer - D - In case of a recession, the Fed might purchase bonds to counter the financial situation.

Key Takeaway: When moving from the peak to the trough, economists say that the economy is experiencing a recession. Bonds are basically certificates that represent money a government or corporation has borrowed from other entities. In order to counter a recession, the Fed should create expansionary fiscal policies that help to stimulate the economy. Purchasing bonds is one way they might do this.