What does the Fed do in 2008

Posted by: admin 3 weeks, 6 days ago

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Today, one of the popular topics related to financial policy is the question on

"Identify the actions taken by the fed to assist banks during the financial crisis 2008. check all that apply.

• The Fed implemented new fiscal policy measures to encourage consumer spending.
• The Fed placed a cap on the cash individuals could receive from banks once.
• The Fed bought securities to increase the money supply.
• The Fed lowered interest rates, hoping to increase available credit.
• The Fed carried out open market operations to stimulate growth."

Based on this question, the answer is 

• The Fed bought securities to increase the money supply.
• The Fed lowered interest rates, hoping to increase available credit.
• The Fed carried out open market operations to stimulate growth."

And why are the first two answers incorrect? 

First, it's not the responsibility of the Fed to take care of fiscal policy; it's the government's responsibility, with the agreement of Congress. Second, the Fed can not cap individuals because such a policy will create turbulence and panic in the economy as people worry that they can not pull their money from the bank. 

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