Policy responses aim to mitigate the adverse effects of financial disruptions from "summary" of Financial Markets and Institutions, Global Edition by Frederic S. Mishkin,Stanley G. Eakins
When financial disruptions occur, policymakers typically respond by implementing various measures designed to lessen the negative impacts on the economy. These policy responses are aimed at stabilizing financial markets, restoring investor confidence, and promoting economic growth. In times of crisis, such as during a recession or a financial meltdown, policymakers may employ both monetary and fiscal policy tools to address the root causes of the disruption and prevent it from spiraling out of control. Monetary policy measures, such as interest rate adjustments and open market operations, are often used to influence the money supply and borrowing costs in the economy. By lowering interest rates, central banks can encourage borrowing and investment, stimulate consumer spending, and boost overall economic activity. Conversely...
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