Describe the ways in which the Federal Reserve adjusted money policy tools in response to the financial crisis of 2007–2009; assess the success or effectiveness of those adjustments. Monetary Policy Tools

Describe the ways in which the Federal Reserve adjusted money policy tools in response to the financial crisis of 2007–2009; assess the success or effectiveness of those adjustments.
Assess to what extent the financial crisis of 2007–2009 compromised the independence of the Federal Reserve.
When promoting economic activity or maintaining price stability, analyze the strengths and limitations of monetary policy and fiscal policy.
Give an example of an expected outcome or economic result that the Fed might have and how it was achieved.
Describe one unintended consequence (such as economic, social, or political) of the Federal Reserve’s actions.

Monetary policy tools

Convectional Money Policy Tools

Some of the conventional monetary policy tools used by the Federal Reserve during the financial crisis of 2007–2009 include OMOs (Open market operations), reserve requirements, discount rate, discount window, and interest on reserve balance (Federal Reserve, 1). The central bank can sell and buy securities on the open market using the Open Market Operations monetary policy tool. In the execution of its monetary policies, the Federal reserve utilized this tool. FOMC (Federal Open Market Committee) set the short-term goal of this tool. Before the global financial crisis of 2007–2009, OMOs were used by the federal reserve to adjust the supply of reserve balances to maintain the lend interest rate at which/ depository institutions are lent reserve balances overnight by other depository organizations to be the target established by the FOMC. Implementing the Federal Reserve’s monetary policies has seen a change, particularly since 2008’s financial crisis. The FOMC also established a federal funds rate that was close to zero. Between 2008 and 2018, the Federal Reserve’s holding on longer-term interest rate was increased. Through a widening of financial conditions that were more accommodating, this led to economic growth and the creation of new jobs. On RRPs (overnight reverse purchase agreements) were used by the Federal Reserve as an additional monetary policy instrument (Federal Reserve,

Some of these regulatory changes are the exemption of reserve requirement and indexation to low reserve, as well as the lower reserve tranche for net .

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