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Since the recession of 2007, the U.S. Federal Reserve has increased bank reserves and brought the...

Question

Since the recession of 2007, the U.S. Federal Reserve has increased bank reserves and brought the...

Since the recession of 2007, the U.S. Federal Reserve has increased bank reserves and brought the federal funds rate (interes
Since the recession of 2007, the U.S. Federal Reserve has increased bank reserves and brought the federal funds rate (interest rate charged by banks on interbank loans) down to 1.25 %. Did this policy save U. S. from another Great Depression?

Answers

Yes the actions of the Fed to engage in monetary expansion, did indeed prevent the recession from getting worse and becoming a crisis like 1930. The reduced rates coupled with quantitative easing programs helped improve the liquidity conditions in the market and firms and individuals were able to borrow more. Thus, as the worst of the recession was over, the US economy slowly started recovering instead of keep going down. Active monetary policy by the Fed was indeed crucial in porviding a boost to the economy and save it from crashing further.


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