Which of the following policies were used in response to the latest financial cr

Question

Which of the following policies were used in response to the latest financial crisis? Of those used, which are examples of monetary policy? Of fiscal policy?

a. Aggressive controlling of inflation by raising interest rates.

     This (Click to select)policy was not usedis an example of fiscal policyis an example of monetary policy.

b. Providing short-term financing directly to small businesses to jump-start investment.

     This (Click to select)is an example of monetary policypolicy was not usedis an example of fiscal policy.

c. Bailing out banks that have large amounts of risky mortgage-backed securities.

     This (Click to select)policy was not usedis an example of monetary policyis an example of fiscal policy.

d. Purchasing long-term bonds to increase the money supply.

     This (Click to select)policy was not usedis an example of fiscal policyis an example of monetary policy.

e. Raising the Social Security eligibility age by five years to encourage people to work.

     This (Click to select)is an example of fiscal policypolicy was not usedis an example of monetary policy.

Explanation / Answer

a. This was used to correct the financial crisis as the economy was struggling to get out of recession and not inflation.

This is an example of monetary policy as the central banks directly controls the money supply through changing the rate of interests.

b. This was not used initially as a response to financial crisis, but was used in the later phase.

This is an example of monetary policy as the short term lending is provided to the businesses directly.

c. This was used as a reponses to financial crisis.

This is an example of monetary policy because the central bank has to provide funds to help the banks to bail out from the risky securities.

d. This was not used initially as a response to financial crisis.

This is directly an example of monetary policy as buying the securities by the central bank is actually practicing the quantitative easing and expanding the money supply.

e. This was not used initially as the response to financial crisis.

This is an example of fiscal policy because the government pays off for the social security schemes.

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