Question

During the economic downturn of 2008-2009, the Federal Reserve a. took the unusual step of using open-market operations to purchase mortgages and corporate debt. b. explicitly set its target rate of inflation well above zero. c. used open-market operations to purchase mortgages and corporate debt, just as it frequently does even when the economy is functioning normally. d. explicitly set its target rate of inflation at zero.

Answer 1

Answer: a. took the unusual step of using open-market operations to purchase mortgages and corporate debt.

Explanation:

During the Great Recession of 2008 - 2009, the Fed realized that it could not sit idly by as it had done during the Great Depression of 1929 and so decided to take some drastic measures to rescue the financial system.

One such measure was the use of open market operations to buy mortgages and corporate debt. The Mortgage market crashing primarily the cause of the crises so the Fed bough them up trying to prop up the market with the hope that the real estate market would begin to recover.