On October 12, 1987, the Dow Jones Industrial Average Plunged

Multiple Choice

On October 12, 1987, the Dow Jones Industrial Average plunged 508 points, wiping out more than $500 billion in a few hours. How did the Fed respond to this drastic fall in the stock market index?

A) The Fed responded precisely as it did when faced with a similar situation in 1929, that is, it deemed that no action was necessary.
B) To encourage the business community to invest in the stock market, the Fed announced that it will sell federal securities to raise the interest rate.
C) In an attempt to ward off a recession, the Fed announced that it will provide adequate liquidity, by buying federal securities.
D) The Fed provided long-term loans to those corporations that experienced significant decreases in their stock value.