Question

In a financial crisis like those that occurred in 2001 and​ 2008, the Fed can A. keep interest rates a bit higher to prevent deflation. B. help stabilize the economy by adjusting its policies and relationships with banks. C. use contractionary policy to offset expansionary fiscal policy and prevent inflation. D. coordinate with central banks in other countries to weaken their economies.

Answer 1

Answer:

B. help stabilize the economy by adjusting its policies and relationships with banks

Explanation:

In the aftermath of the financial crisis, the role of the Fed is to stabilize the economy and put it on the path of the growth and development. To achieve this objective, Fed reduces the interest rate to stimulate the economy while making coordination with banks so that loans and finances are issued on attractive terms to the firms and households.

Answer 2

Answer:

C. Use contractionary policy to offset expansionary fiscal policy and prevent inflation

Explanation:

After the financial crisis, there was a need to stabilize the economy by decreasing the interest rates to encourage necessary borrowing and offset the expansionary fiscal policy to reduce tax rates to decrease inflation.

Hope this helps.

Thank You.