The U.S. Federal Reserve and central banks around the world have taken steps to expand money supplies to avoid the risk of a deflationary spiral, in which lower wages and higher unemployment lead to a self-reinforcing decline in global consumption. In addition, governments have enacted large fiscal stimulus packages, by borrowing and spending to offset the reduction in private sector demand caused by the crisis. The U.S. Federal Reserve's new and expanded liquidity facilities were intended to enable the central bank to fulfill its traditional lender-of-last-resort role during the crisis while mitigating stigma, broadening the set of institutions with access to liquidity, and increasing the flexibility with which institutions could tap such liquidity. COUNT 5
QSN1 What have central banks around the world done to avoid the risk of a deflationary spiral? ANS1 expand money supplies QSN2 What have governments done to offset the reduction in private sector demand? ANS2 enacted large fiscal stimulus packages QSN3 What is the U.S. Federal Reserve's traditional role during a crisis? ANS3 lender-of-last-resort QSN4 What did the U.S. Federal Reserve do to increase access to liquidity? ANS4 expanded liquidity facilities QSN5 What type decline does lower wages and higher unemployment lead to? ANS5 self-reinforcing decline