Business Economics United States Assignment 2022

Running head: BUSINESS ECONOMICS
Business Economics
Name of the Student
Name of the University
Course ID

BUSINESS ECONOMICS1
Table of Contents
Federal Reserve response to COVID-19 crisis................................................................................2
Role of Fed’s action in mitigating COVID-19 crisis.......................................................................3
Analysis of the effect of Fed’s action..............................................................................................4
References........................................................................................................................................6

BUSINESS ECONOMICS2
Federal Reserve response to COVID-19 crisis
Federal Reserve has actively intervened to stabilize the economy of United States in the
face of current COVID 19 pandemic. The Federal Reserve has taken a broad array of action to
limit the likely damage of the economy from the pandemic. Fed has given around $2.3 trillion
lending support to the household, financial market, employers and local and state government.
The steps so far have been taken by Fed are as follows.
Cut in federal fund rate
Federal Reserve has cut the overnight borrowing rate for banks by a total of 1.5 percent
since 3rd of March. With this the Fed has brought the fund rate down to a range from 0 to 0.25
percent basis point.
Quantitative Easing
Fed first adapted the policy of quantitative easing during the financial crisis of 2008. The
objective is to keep the long term interest rate low through purchase on bank securities and
treasuries (federalreserve.gov, 2020) On March 15, Fed has cut the rate close to zero by
restarting large scale purchase and making open-ended commitments.
Discount Window
Banks have borrowed the highest since 2009 on an urgent basis from the central bank.
Policy makers have reduced the rate applied on funding to 0.25 percent and extended the length
of loans from 1 day to 90 days.