During the turmoil in the market for subprime mortgages in 2007 and 2008,the Fed increased the volume of discount loans.The goal of the Fed was to
A)reduce the rate of inflation.
B)stimulate economic growth.
C)reduce unemployment.
D)reassure financial markets and promote financial stability.
E)reduce the current account deficit.

Question

Quizplus · Accepted Answer

The Fed increased the volume of discount loans to reassure financial markets and promote financial stability during the turmoil in the market for subprime mortgages in 2007 and 2008. Discount loans provide short-term liquidity to banks thereby helping them to stay afloat during times of financial instability. By increasing the volume of discount loans, the Fed was able to ease concerns in the financial markets and prevent a full-blown financial crisis.

During the Turmoil in the Market for Subprime Mortgages in 2007