Why did the monetary base increase rapidly during the economic crisis of 2008?
A) The Fed purchased more assets and extended more loans.
B) The Fed sold financial assets and extended fewer loans.
C) The Fed purchased more assets, but extended fewer loans.
D) The Fed sold financial assets, but extended more loans.

Question

Quizplus · Accepted Answer

During the economic crisis of 2008, the Federal Reserve, through its monetary policy, aimed to increase the money supply to prevent a deflationary spiral. It did so by purchasing more assets (e.g., Treasury bonds, mortgage-backed securities) from banks, injecting liquidity into the financial system, and extending more loans to banks through its discount window. These actions led to a rapid increase in the monetary base.

Why Did the Monetary Base Increase Rapidly During the Economic