1. Which of the following actions did the Fed take to stabilize the financial en

Question

1. Which of the following actions did the Fed take to stabilize the financial environment after the financial markets collapsed in 2007-2008?

a) It began to charge interest on reserves banks kept at the Fed.
b) It chose to not buy troubled assets from banks.
c) It increased the interest rate to help banks regain their health.
d) It ensured that the markets in commercial paper and other securities that were not functioning properly ceased to function.
e) It lent money to nonbanks at the discount window.

2. The Federal Deposit Insurance Corporation (FDIC) was created to:

a) provide depositors with a short-term source of funds for low-interest consumer loans.
b) apprehend counterfeiters.
c) help stop bank failures.
d) provide a safe place for savings of particular groups of people.
e) fund small-scale businesses.

Explanation / Answer

Question 1: option b is correct.

2007-2008 debt crisis is also known as subprime debt crisis which is caused by large amount of subprime lending by banks. This is why Fed stops buying troubled assets to remove subprime and bad lending practices from the market and bring the economy on sound lines of growth.

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