Question

The Fed intervened heavily in the credit crisis. Do you believe the Fed’s intervention improved conditions in financial markets or made conditions worse?

Provide a brief narrative explanation with an example.

--- TYPE ANSWER AND PLEASE DO AT LEAST 8 SENTENCES FOR THIS ANSWER.

Answer 1

I believe Fed Intervention during credit crisis has improved the condition in financial markets. I have two reasons to support my argument.

1. In 2008 and in 2009 , GDP growth rate had gone in negative. After Feds major intervention in market, from 2010 to 2017 USA growth is in positive figures and 2010, 2012, 2014, 2015 and 2017 it has been more than 2 %.

2. Since 2010, unemployment rate is only coming down. In 2018, it was less than 4 %.

This shows that availability of credit is leading to job growth along with real GDP increase. This also shows that inflationary pressures are in control. If Fed had not intervened then it is true that market would have adjusted but at a cost of job loss and decrease in GDP growth rate.