In comparing the actions of the Fed in the fall of 1998 with its actions in the fall of 1991, we can say that
A)in both instances the Fed moved quickly to raise interest rates in the face of an expected increase in inflation.
B)in both instances the Fed moved quickly to cut interest rates in the face of signs of a credit crunch.
C)the Fed moved more quickly in 1998 than in 1991 to cut interest rates in the face of signs of a credit crunch.
D)the Fed failed in both cases to take action in the face of signs of a credit crunch.

Question

Quizplus · Accepted Answer

In the fall of 1998, the Fed moved quickly to cut interest rates in response to signs of a credit crunch caused by the failure of Long-Term Capital Management. However, in the fall of 1991, the Fed did not move as quickly in response to a credit crunch caused by the savings and loan crisis. Therefore, option C is the correct answer as it correctly states that the Fed moved more quickly to cut interest rates in 1998 than in 1991.

In Comparing the Actions of the Fed in the Fall