Question

If the United States falls into a recession, which action would the Federal Reserve take to encourage employment?

Answer 1

Monetary Policy.

Answer 2

monetary policy yes. We know monetary policy because the question specifically refers to the federal reserve, which can ONLY do monetary policy. In fact the fed would want to engage in what's known as expansionary monetary policy (they will try to grow the economy). They do this by purchasing US securities (think US debt). When they do that they pump money into the economy, which lowers interest rates, which in turn increases aggregate demand!