From September 2007 to April 2008, the Fed lowered the federal funds rate from 5.25 percent to 2 percent in a series of steps. The Fed's actions were largely in response to
A) threats to the ﬁnancial system from the mortgage default crisis.
B) forecasts of higher inﬂation rates.
C) Chinese refusal to allow their exchange rate to reﬂect market conditions.
D) pressure from the president to offset contractionary effects of a tax increase.

Question

Quizplus · Accepted Answer

The Fed's actions were largely in response to threats to the financial system from the mortgage default crisis. Lowering the federal funds rate was seen as a way to stimulate the economy and prevent further damage from the crisis.

From September 2007 to April 2008, the Fed Lowered the Federal