After the attack on the World Trade Center in New York on September 11, 2001, the U.S.Fed decided to
A)cautiously assess the situation and wait several days before taking any policy action
B)lower reserve requirements for banks to signal its desire to stimulate the economy
C)increase bank reserves to guarantee liquidity to the financial system
D)close for a few days and therefore could not undertake any open market operations
E)undertake large open market sales to indicate to the world that financial markets still worked

Question

Quizplus · Accepted Answer

In response to the attack, the U.S. Fed increased bank reserves to guarantee liquidity to the financial system, as there was concern that the attack may have disrupted financial markets and caused a run on banks. By increasing bank reserves, the Fed helped to ensure that banks had the liquidity they needed to meet the demands of their depositors and maintain confidence in the financial system.

After the Attack on the World Trade Center in New