Extended Essays 2021

Table 1 (Coinnews Media Group LLC, 2021): Annual Inflation Rates for the 2008 economic

crisis

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ave

2007 2.1 2.4 2.8 2.6 2.7

2.7 2.4 2.0 2.8 3.5 4.3 4.1 2.8

2008 4.3 4.0 4.0 3.9 4.2

5.0 5.6 5.4 4.9 3.7 1.1 0.1 3.8

2009 0

0.2 -0.4 -0.7 -1.3 -1.4 -2.1 -1.5 -1.3 -0.2 1.8 2.7 -0.4

Table 2 (Coinnews Media Group LLC, 2021): Annual Inflation Rates for the 2020 economic

crisis

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ave

2020 2.5 2.3 1.5 0.3

0.1 0.6 1.0 1.3 1.4 1.2 1.2

1.4 1.2

2021 1.4 1.7 2.6 4.2

5.0

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According to the background information, one of the most important categories of monetary

policy the U.S. Federal Government introduced was the interest rate reduction. Like the loose

quantitative policy, the government adopted a small number of long-term interest rate cuts in

2008. Therefore, supporting and reducing the cost of borrowing for firms and households,

thus, directly lower the enterprise production cost and increases the currency flow. Compared

with the mitigation policy for the economic crisis, the Federal Reserve in 2020, cut the

federal funds rate by 150 basis points to 0-0.25% on 3 and 15 March, which was more rapid,

but less than in 2008. For these two economic crises, the interest rate was reduced by the

same 0-0.25%. However, in 2008, the interest rate was reduced within one year, was more

than 3 times that in 2020 within 12 days. Therefore, the overall interest rate reduction of 2020

was more rapid, but due to the smaller policy space, the interest rate reduction was less than

that in 2008.

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