1. Where the Federal Reserves effective in ending the recession and stimulating

Question

1. Where the Federal Reserves effective in ending the recession and stimulating a recovery in a timely fashion? (For comparison, you may wish to review past business cycle time periods by examining the business cycle data at the National Bureau of Economic Research.)

2. What was the impact on the housing market from the FED's purchases of mortgage backed securities?

3. What is the risk of inflation presented by the huge growth in the monetary base? What has been the inflationary/deflationary impact(s) of the growth in the monetary base so far, if any?

Explanation / Answer

Q1 is incomplete.

So, Q2 is answered below.

The 2008 financial crisis in the US forced the fed to adopt certain measures from time to time to protect the economy from falling into a deep recession. One of the measures was the purchasing of mortgage backed securities. The purchasing of these securities was a part of the quantitative easing (QE) method adopted by the Fed to increase the supply of money in the economy and reduce mortgage interest rates. These securities were backed by government sponsored enterprises-Fannie Mae and Freddie Mae. The strong backing of securities by government agencies led to an increase in the support to housing markets and an increase in demand for houses by increasing the purchasing power of the consumers.

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