Final answer:
The Fed introduced term auction lending during the 2007 financial crisis to increase liquidity in the financial system, part of broader measures to support the economy.
Step-by-step explanation:
In the early stages of the 2007 financial crisis, the Federal Reserve Bank introduced term auction lending to increase the amount of liquidity in the financial system. This action was part of a broader strategy to support the economy by providing emergency loans, purchasing assets from banks, and enacting policies like quantitative easing.
These measures were taken to ensure that banks had enough funds to lend to businesses and consumers, which in turn helped to lower short-term interest rates, facilitate consumer spending, and bolster the overall financial market.