Actions taken by Government: Difference between revisions
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In the days following the 9/11 attacks, the economic effects were unclear and extremely hard to predict. For this reason, the government was forced to take immediate actions to help limit the effect that the attacks would have on nation's already fragile economy. All flights were grounded and the stock market was shut down. The Federal Reserve liquidated all assets and shut down stock market to prevent bank run and panic. The government used fiscal policy to provide funding for programs, monetary policy to increase the money supply in order to assist financial transactions, and international agreements to formulate a coalition against terrorism and ensure cooperation amongst global banks. | In the days following the 9/11 attacks, the economic effects were unclear and extremely hard to predict. For this reason, the government was forced to take immediate actions to help limit the effect that the attacks would have on nation's already fragile economy. All flights were grounded and the stock market was shut down. The Federal Reserve liquidated all assets and shut down stock market to prevent bank run and panic. The government used fiscal policy to provide funding for programs, monetary policy to increase the money supply in order to assist financial transactions, and international agreements to formulate a coalition against terrorism and ensure cooperation amongst global banks. The major goals of President Bush, his administration, and the Federal Reserve were to stabilize economic activity and restore confidence amongst American consumers. | ||
== Fiscal Policy == | == Fiscal Policy == | ||
[[Image:fiscal_policy.JPG|thumb|right]] | [[Image:fiscal_policy.JPG|thumb|right]] | ||
The government operated at a budget deficit. | The government hoped to calm markets and boost consumer confidence by increasing aggregate demand, and they operated at a budget deficit. Funding was necessary for homeland security, humanitarian aid, and military action, all of which required money for equipment, personnel, and operations. On September 14, 3 days after the attacks, Congress approved a $40 billion emergency spending package. President Bush requested emergency spending authority for disaster relief, military operations, and the war against terrorism, and he was granted authority to spend $20 billion for such programs. $2.5 billion was given to the Department of Defense, and airlines received $15 billion in support, although they asked for $24 billion. The Federal Emergency Management Agency (FEMA), was allocated $2 billion for clean up, humanitarian aid, disaster relief, and overall support to New York City and Washington DC. | ||
== Monetary Policy == | == Monetary Policy == | ||
The Federal Reserve aimed to increase money supply to aid transactions of individuals, businesses, and financial institutions. They bought a number of government bonds and securities through open market operations, and put $100 billion into the financial system each day immediately following the attacks. On September 14, The Fed made an open market purchase of US Treasury securities worth $80 billion, then made an additional purchase of $57 billion 3 days later. The Fed also distributed $11.7 billion in loans to banks. The increase in money supply caused interest rates to fall. The federal funds rate dropped from 3.5% on September 10 to 1.25% on September 18. | |||
<p align="center">[[Beyond the Economy]]</p> | |||
<p align="center">[[Economic Impact of 9/11]]</p> | <p align="center">[[Economic Impact of 9/11]]</p> | ||
Latest revision as of 01:51, 6 December 2007
In the days following the 9/11 attacks, the economic effects were unclear and extremely hard to predict. For this reason, the government was forced to take immediate actions to help limit the effect that the attacks would have on nation's already fragile economy. All flights were grounded and the stock market was shut down. The Federal Reserve liquidated all assets and shut down stock market to prevent bank run and panic. The government used fiscal policy to provide funding for programs, monetary policy to increase the money supply in order to assist financial transactions, and international agreements to formulate a coalition against terrorism and ensure cooperation amongst global banks. The major goals of President Bush, his administration, and the Federal Reserve were to stabilize economic activity and restore confidence amongst American consumers.
Fiscal Policy
The government hoped to calm markets and boost consumer confidence by increasing aggregate demand, and they operated at a budget deficit. Funding was necessary for homeland security, humanitarian aid, and military action, all of which required money for equipment, personnel, and operations. On September 14, 3 days after the attacks, Congress approved a $40 billion emergency spending package. President Bush requested emergency spending authority for disaster relief, military operations, and the war against terrorism, and he was granted authority to spend $20 billion for such programs. $2.5 billion was given to the Department of Defense, and airlines received $15 billion in support, although they asked for $24 billion. The Federal Emergency Management Agency (FEMA), was allocated $2 billion for clean up, humanitarian aid, disaster relief, and overall support to New York City and Washington DC.
Monetary Policy
The Federal Reserve aimed to increase money supply to aid transactions of individuals, businesses, and financial institutions. They bought a number of government bonds and securities through open market operations, and put $100 billion into the financial system each day immediately following the attacks. On September 14, The Fed made an open market purchase of US Treasury securities worth $80 billion, then made an additional purchase of $57 billion 3 days later. The Fed also distributed $11.7 billion in loans to banks. The increase in money supply caused interest rates to fall. The federal funds rate dropped from 3.5% on September 10 to 1.25% on September 18.
