According to current monetary policy, what action would most effectively help to end a recession in the United States?

The action of the Federal Reserve decreasing the interest rate and buying government securities is a well-established strategy to stimulate the economy during a recession. Lowering interest rates reduces the cost of borrowing for consumers and businesses, encouraging spending and investments, which can help revitalize economic activity. By making loans cheaper, it enables businesses to expand and hire more workers, while consumers may feel more inclined to take out loans for major purchases, thus boosting demand.

In addition to interest rate cuts, when the Federal Reserve buys government securities, it injects liquidity into the banking system. This increase in money supply further encourages lending and investment, supporting economic growth during tough economic times. Both measures work in tandem to enhance overall economic conditions, which is crucial for recovering from a recession.

In contrast, other strategies such as increasing taxes or reducing spending could contract economic activity, exacerbating a recession. Higher taxes reduce disposable income for consumers and limit business investment, while cuts in government spending can lead to job losses and decreased demand in the economy. Similarly, raising interest rates would generally be counterproductive during a recession, as it would increase borrowing costs and discourage both consumer spending and business investment. Therefore, the correct answer reflects the most effective monetary policy response to a recession.