Question

The economic and financial crisis of 2008-2009 represents the most serious economic downturn in the U.S. and the world since 1929. Review and discuss the Federal Reserve and its role in our economy during this time including a discussion of our nation's three main economic goals. Describe the historic monetary and fiscal policy efforts undertaken by the U.S. Government and Federal Reserve including both the traditional and non-traditional measures to ease credit markets and stimulate the economy. Finally, relate the Fed and U.S. Government involvement to our present volatile environment and indicate what measures, if any, each should pursue in the next 12-24 months, given the status of our three main economic goals. Include a discussion on return from historically low interest rates, the Fed balance sheet, historically high federal / U.S. debt levels, and potential new fiscal policy and monetary policy initiatives.

Answer 1

Ans- Economic crises means when there is an emergency come in an economic like stock market operation , inflation and unemployement . Financial crises means the value of financial assets suddenly decreases.

In 2008-09 , the world faced many economic and financial problem like many financial institutions started to go down due to limited sources . For this purpose , the US government provide many financial support to the company to face the situation.

2 Federal Reserve - The meaning of federal reserve means 'Fed' stand for Central Bank of United States . It was created by the government to provide money to the company . In this various types of monetary and financial support given to the companies which is more safer and flexible .

ROLE OF FEDERAL RESERVE

The role of federal reserve are as follow;

1 . Firsty , conducting the monetary policy. In this , various actions will be taken . They promote employement , stable prices .

2 . Promoting Financial System Stability - Under this , they stable the financial institutions , financial market and financial infrastructure facilities .

3 . Supervising and Regulating financial institution and its various activites  through which they remove the financial problems in the economy .

Three economic goals are following under federal reserve system:

1 Stable prices

2 Employement

3 Econimic growth

1 Stable price means to maintain and support the monetary and fiscal which is helpful for the companies in the business. Under this , inflation is moderate and predictable .

2 Full employement is an another economic goal of federal reserve . In this , all skilled and unskilled labour can be employed within an economy .

3 Econmic growth means there is an increase in amount of   goods and services in an economy which increase the profits which is also increase the GNP of an economy .

The historic monetary and fiscal policy efforts undertaken by the US Government :

1 In this , the US Government generated more and more employement in the economy .

2 Another objective is price stability which support the various financial companies .

3 There are no politocal interfare for the conduct of monetary policy .

4 The main support is short term interest rate .

The explanation of following aspects are:

Low interest rate - Low interest rate is defined as a rate when the risk free rate of intersest is lower than the historic average .

The federal reserve latest economic forecast is the interest rate near to zero because they want to strengthen the economy .

The fed balance sheet - A sizeable balance sheet in which a large amount of assets and liabilites are included . In this , a lot of information incuded regarding its operation . In this , interested parties easily implement the monetary policy after study of federal balance sheet .

Through this , public interest has increased which is helpful for the development of economy .

The potential new fiscal and monetary policy initiative - With the help of this , an economy achieve its objective of high level of output and full employement in time . Which is helpful for the economic growth and develoment .