Question

Find and briefly describe a real-life example of essential government intervention in an essentially market at any time previously anywhere in the world, which is similar to the US Federal Reserve's rate cut decision. Did that intervention produce its intended results? How can that example be used to inform the stated aims of the rate cut decision (2020)?

With your own words, do not copy-paste from the internet.

Answer 1

The real life example is the Another decision taken up by Fed after the 2008 financial crisis. At that time period, also, Fed reduced its federal fund rate (FFR) up to the level of 0% along with increasing the money supply after 2008 crisis. This type of expansionary monetary policy, worked to help US economy recover, slowly, but progressively in coming years as unemployment rate decreased and GDP growth rate become positive. Claims of unemployment benefits also decreases as a vindication of the monetary policies used at that time.

On the basis of what happened after 2008 crisis, the policy cuts in 2020 in the wake of slowdown due to pandemic will also show positive impact, but it will take more time, because demand as well as supply both are down while global economy is under huge slowdown as well. While the Fed's rate cut in 2020 is proactively done with complement by the fiscal policy of $3 trillion to stimulate the economy. It will help economy to maintain in a good health, more than it was expected. So, the policy in 2020 will be effective, albeit slowly due to global slowdown and lack of demand in world economy.