Which of the following was true of the actions of the Federal Reserve in response to the recession of 2008?
A) The Fed shifted toward a highly restrictive monetary policy in 2008, which was a major cause of the recession.
B) The Fed continued to focus only on price stability and therefore it expanded the money supply at a slow and steady rate throughout the recession.
C) The Fed introduced several new procedures for the conduct of monetary policy and substantially increased bank reserves as the recession worsened.
D) The Fed continued to purchase and sell only U.S. Treasury bonds when conducting open market operations to control the money supply.

Question

Quizplus · Accepted Answer

The Fed introduced several new procedures for the conduct of monetary policy, including substantially increasing bank reserves, in response to the recession of 2008. This was done to support the functioning of financial markets and stabilize the economy. The Fed did not shift toward a highly restrictive monetary policy, which would have worsened the recession. Additionally, the Fed's focus on price stability did not preclude it from expanding the money supply to support the economy. Lastly, the Fed did conduct open market operations to control the money supply, but it also introduced new measures such as quantitative easing to support the economy during the recession.

Which of the Following Was True of the Actions of the Federal