During the Great Recession, the federal government created the Troubled Asset Relief Program. This was an unconventional...
During the Great Recession, the federal government created the Troubled Asset Relief Program. This was an unconventional fiscal policy action because ___.
a. taxes were raised during a recession
b. the budget deficit increased
c. the federal government began making mortgages directly to homeowners
d. the federal government temporarily became partial owners of investment banks and automobile companies
Homework Answers
Answer:- Option d:- the federal government temporarily became partial owners of investment banks and automobile companies
Reason:- US Federal government has introduced Troubled Asset Relief Program (TARP) during Great Recession period. The purpose of TARP program was to purchase the equity shares of the institutions which have financial loss with the evil effects of sub-prime mortgage crisis and unsound economic conditions in all sectors in the nation. Especially Automobile companies faced the crunch situation of covering the basic operational cost to run their firms. US federal government has allocated $700 million funds for the TARP program. It also indirectly purchased the shares of the investment banks. Some custodian properties values are restored by US treasury department in order to safeguard the properties of the customers by underwriting the appreciation with increased rate for the short-time period. Such properties are mortgaged by the banks to compensate the loss. Again TARP program released the fund to restore the properties of the customers with the same market value of the appreciation. TARP program has also bought equity shares of all sick automobile industries through US Treasury Department and the operational plan was closely monitored by the same department. And also it has the focus of creating more capital and employment opportunities through such automobile industries. As federal government itself funded to solve the financial crisis of the automobile and other industries, the operational plan of TARP was considered as the unconventional fiscal policy.
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