List and explain some important monetary policies related to

List and explain some important monetary policies related to Great Depression and Global Financial Crisis.

Solution

The monetary policies were utilized as the main instruments for promoting the maximum performance of the economy. During the Great Depression Fed’s monetary policies were “exceptionally contractionary” whuch was the result of “misguided policies”. During recession of 2008 monetary policy is expansionary. During economic slowdowns, Fed lowered the shorter-term interest rates for loosening credit thus allowing more money circulation in the economy During 2008, it incrementally reduced its target rate from 3.50 percent in January to below 0.25 percent in December, where it has remained. With the employment rate still low and the federal funds rate near zero, the Fed adopted quantitative easing—the purchase of financial assets such as mortgage-backed securities and Treasury for reducing long-term interest rates, thus increasing the money supply.