Question

How did the U.S. government and Federal Reserve respond to the perfect financial storm in 2008-2009 and recent world health pandemic (covid-19) Briefly explain.

Answer 1

United State Government and Federal Reserve responded to financial crisis in 2008 through providing with Fiscal stimulus in abundance and cutting off interest rate to the maximum possible extent in order to stimulate the demand, in the overall economy. It also provided with bailout packages to various companies who where is failing to survive at that point of time and acted as a mediator between various companies for merger and acquisition so that the entire economy can survive and sustain. It also acted so that contagian could be stopped from spreading into the widespread economy. Management of 2008 crisis was mostly reactive in nature.

While in case of recent health crisis which is unfolding due to widespread coronavirus which is triggering economic crisis, United State government as well as Federal Reserve has been proactively managing the crisis as the Federal Reserve has adopted quantitative easing and liberal monetary policy in order to cut the interest rate to almost zero, to stimulate the demand into the economy and it is also trying to support various companies by announcing bailout packages, and United States government is also trying to infuse the liquidity into the economy and it is also trying to provide the medical packages to various people so that the economy could survive and sustain to thrive in the long run through revival of demand and generation of employment.