325_Supplement12

325_Supplement12 - Department of Economics University of...

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Intermediate Macroeconomic Analysis Spring 2011 1 Department of Economics University of Maryland Economics 325 Intermediate Macroeconomic Analysis Supplement 12 Professor Sanjay Chugh Spring 2011 The following op-ed by Federal Reserve Chairman Ben Bernanke appeared in the Washington Post on November 4, 2010, the day after the Fed’s decision that it would engage in a second round of “quantitative easing.”
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Intermediate Macroeconomic Analysis Spring 2011 2 What the Fed did and why: supporting the recovery and sustaining price stability By Ben S. Bernanke Thursday, November 4, 2010 Two years have passed since the worst financial crisis since the 1930s dealt a body blow to the world economy. Working with policymakers at home and abroad, the Federal Reserve responded with strong and creative measures to help stabilize the financial system and the economy. Among the Fed's responses was a dramatic easing of monetary policy - reducing short-term interest rates nearly to zero. The Fed also purchased more than a trillion dollars' worth of Treasury securities and U.S.-backed mortgage-related securities, which helped reduce longer-term interest rates, such as those for mortgages and corporate bonds. These steps helped end the economic free fall and set the stage for a resumption of economic growth in mid-2009. Notwithstanding the progress that has been made, when the Fed's monetary policymaking
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325_Supplement12 - Department of Economics University of...

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