During the stock market crash of October 1987,the Fed
A) nearly created a financial panic by not acting as a lender of last resort.
B) nearly created a financial panic by raising the discount rate.
C) prevented a financial panic by raising reserve requirements.
D) prevented a financial panic by providing liquidity to the financial system.

Question

Quizplus · Accepted Answer

The Federal Reserve (Fed) prevented a financial panic during the stock market crash of October 1987 by providing liquidity to the financial system. The Fed injected a significant amount of liquidity into the market through open market operations, which helped stabilize the system and prevent a widespread panic. The other options, such as raising the discount rate or reserve requirements, would have likely worsened the situation and caused more panic in the market.

During the Stock Market Crash of October 1987,the Fed