Conventional monetary and fiscal policies during a financial crisis are aimed at _____, while acting as a lender of last resort or injecting government funds into the financial system during a financial crisis is aimed at _____.
A) increasing output; reducing inflation
B) expanding aggregate demand; fixing the financial system
C) increasing corporate wealth; increasing household wealth
D) expanding aggregate supply; reducing the national debt

Question

Quizplus · Accepted Answer

Conventional monetary and fiscal policies are aimed at expanding aggregate demand, which can help to stimulate economic activity and boost output during a financial crisis. However, these policies may not be sufficient on their own to address the underlying problems in the financial system that are causing the crisis. Acting as a lender of last resort or injecting government funds into the financial system is aimed at fixing the financial system itself and restoring confidence in financial markets, which can ultimately contribute to restoring economic growth.

Conventional Monetary and Fiscal Policies During a Financial Crisis Are