ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The Fed responded to the crisis with a four-pronged strategy. First, it flooded the banking sector with liquidity. Second, it invoked emergency powers granted to it during the Great Depression to lend to financial institutions other than banks. Third, it quickly cut the funds rate to zero.

Detailed explanation-2: -The Federal Reserve responded aggressively to the financial crisis that emerged in the summer of 2007, including the implementation of a number of programs designed to support the liquidity of financial institutions and foster improved conditions in financial markets.

Detailed explanation-3: -To stabilize the financial system, the Fed implemented a number of temporary emergency lending programs to provide funding to nonbank financial institutions. These included primary securities dealers, money market mutual funds, commercial paper issuers, and purchasers of securitized loans.

Detailed explanation-4: -1. In 1929 the Fed tried to institute a tight money policy, in order to restrain the stock market boom.