CNN: Fed takes emergency action to stave off a depression

Article published: March 23, 2020

IB Economics syllabus: Macroeconomics (expansionary monetary policy)

In an effort to “prevent the health crisis from turning into a full-blown financial crisis” the U.S. central bank (the Fed) has announced an unlimited bond-buying program, also known as an “open-ended quantitative easing.” This means that the Fed will continue to pump money into the economy in a n attampt to do “whatever it takes” “to support small- and medium-sized businesses.” Thus, this can be regarded an an all-out expansionary monetary policy, which is aimed at boosting aggregate demand during these hard times caused by the coronavirus. As you can imagine AD is basically collapsing with consumption, investment and net exports plummeting, so central banks and governments do everything they can, to keep their economy running and to avoid another Financial Crisis.

Also, the U.S. government is planning to come up with a fiscal stimulus package (expansionary fiscal policy) of $2000 billion to same the American economy from collapsing. I will post about it too, once the decision is made.

Source of image: Mandel Ngan / AFP via Getty images

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