Which of the following policy combinations was used by the government during the financial crisis of 2007-2009 in the United States?
A) Income tax rates were increased, and payroll taxes were reduced.
B) Payroll tax rates were increased, and government spending was reduced.
C) The federal funds rate was decreased, and the quantity of required reserves was increased.
D) A combination of both fiscal and monetary policies was used.

Question

Quizplus · Accepted Answer

The financial crisis of 2007-2009 in the United States required a combination of both fiscal and monetary policies to address the various problems in the economy. The Federal Reserve implemented monetary policies such as decreasing the federal funds rate and increasing the quantity of required reserves to increase liquidity in the market. At the same time, the government implemented fiscal policies such as the American Recovery and Reinvestment Act of 2009, which involved government spending to stimulate economic growth. Therefore, D is the correct answer.

Which of the Following Policy Combinations Was Used by the Government