Question

Describe the monetary policy tools used by the Federal Reserve. Explain how the central banks around the world adjusted their monetary policy during the recent financial crisis (2007-2008).

Answer 1

The central Banks all over the world  tried to lose the Monetary policy like in USA opted for quantitative easing and Bailout.

Quantitative easing means Its an unconventional monetary policy where in the central bank purchases government securities and other securities to reduce interest rates and increase the money supply to induce investments and to revive the economy.

Bailout means business,government ,or individual offers money to a failing business to prevent the consequence that arise from business downfall.

In this way they loosen the monetary policy to increase money supply.