If the US dollar falls into decline then it will create huge financial imbalances within the economy and as a result the United States would have to introduce more expansionary macroeconomic policy and there is a risk of the economy going into a tailspin. This is where expansionary macroeconomic policy comes into play.
The key point here is that the US Federal Reserve System should take a very aggressive approach and implement more expansionary macro economic policy when there is a danger that the economy is headed for a recession. In order for this to happen the Federal Reserve needs to maintain a very tight monetary policy. This means that it would not be prudent for the Federal Reserve to cut interest rates any lower than they have already done in order to achieve a higher inflation rate.
The reason why this is so important is because a higher inflation rate means that there is a greater risk of the economy contracting and going into a recession. However, as long as the central bank is able to maintain a very tight monetary policy and continue with its quantitative easing (QE) programs then it will be able to prevent this from happening.
This form of economic policy is best employed by the Federal Reserve after having made adjustments to its inflation target in order to bring it back into line. The goal of expansionary macro economic policy is to stimulate the economy and get it moving back towards its previous growth rate.
When an economy is in recession, it is best that the central bank implements some expansionary macro economic policy because at this point it is much too late. The only thing left to do at this point is to pull the economy out of recession. It will help if the central bank has taken steps to increase the money supply through quantitative easing so that it has more money available in order to stimulate the economy. This is one of the main reasons that expansionary macro economic policy is beneficial for the economy in general.
In conclusion, it is important for the central bank to adopt an aggressive approach to implementing expansionary macro economic policy during a recession. This approach can only help the economy get out of recession faster and as a result it is important for the central bank to make these policies even when it is not in recession.