Question

17. Why is the composition of the Fed’s balance sheet a potentially important aspect of monetary policy during an economic crisis?

Short answer

For keeping control of the crises, it gets changes its balance sheet by changing the assets and liabilities. This impacts the money supply of the economy and hence recuperates an economy.

Step-by-step solution

Concept Introduction

Federal Reserve Bank balance sheet _The Balance Sheet of the Federal Reserve Bank

The Fed's assets consist primarily of government securities and the loans it extends to its regional banks.

Explanation

The Central bank assumes a predominant part during economic crises. It executes monetary policy to control the crucial situation. It generally works for the growth of the economy. The super intention it conveys is to increase the employment level in the economy and to deal with the pace of interest.

Final Answer

For keeping control of the crises, it gets changes its balance sheet by changing the assets and liabilities. This impacts the money supply of the economy and hence recuperates an economy.