As a response to the economic slowdown following the financial crisis, the Fed cut the Federal...

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Economics

As a response to the economic slowdown following the financialcrisis, the Fed cut the Federal funds rate to near 0 by the end of2008, and tried to provide further monetary stimulus throughâ€œunconventionalâ€ policies. In a short paragraph, describe some ofthese unconventional tools that were used by the Fed during thisperiod, and explain how these tools could increase demand even whenthe Fed funds rate stays constant at zero.

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The Federal Reserve System the US Central Bank is the largest policymaking body in charge of the fight against recessions It is also one of the organizations responsible for overseeing banks and maintaining the integrity of the financial system Consequently starting in 2008 and continuing for several subsequent years the Fed was on the front lines of combating interconnected crises in the banking system and the real economy In its war on the crisis the Fed has deployed a wide range of tools including the traditional tricks of monetary policy plus a range of unconventional measures Its been in the public eye as never before and been subjected to an unprecedented level of political criticism The Feds main tactics were Interest rate cuts Targeted assistance to ailing financial institutions Quantitative easing or LargeScale Asset Purchases Forward guidance about interest rates Despite the Feds efforts unemployment remained See Answer

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