Question

Please provide a thorough explanation/answer:

How did the FED respond to the financial crisis of 2008, and was this response effective? Was the fiscal stimulus effective?

Answer 1

FED responded aggressively to the crisis and implemented a lot of programs to support financial liquidity, maximum employment and price stability.

Fed approved currency swap agreements to provide dollar liquidity to banks.

FED provided short term lending through discount window.

Fed provided direct liquidity to borrowers and investors through key credit markets and instruments like commercial paper and mutual fund.

Fed expanded open market operations and put downward pressure on long term interest rates.

Yes, these were effective and eased overall financial conditions.