What measures do governments typically take during a financial crisis?

That's an excellent question. When a financial crisis hits, people panic, feeling like the sky is falling. At such times, it's up to the government, acting as a "parent figure," to step in. The government's toolkit actually contains only a few instruments, but how and with what intensity they are used depends on the specific circumstances.

Let's imagine the entire economy as a somewhat ailing person, and the government as the doctor. This doctor has two main "treatment plans":

First Plan: Monetary Policy (Mainly the "Central Bank's" Job)

The "Central Bank" refers to the central bank, such as the People's Bank of China or the US Federal Reserve. Its primary role is to manage "money." During a financial crisis, the biggest market problem is a lack of money, or rather, money not "flowing." People are afraid to spend and invest. So, the central bank's intervention aims to increase the money supply and get it circulating again.

Interest Rate Cuts (Making Money "Cheaper") Think about it: if the interest rates on bank loans decrease, wouldn't you be more willing to borrow? Company owners, seeing cheaper loans, might be more inclined to borrow for investing in new factories or expanding production. Ordinary people, seeing lower mortgage and car loan rates, might also be more willing to spend. This stimulates economic activity across the entire market. It's like a big sale at a shopping mall, encouraging you to buy things.
Injecting Liquidity (Directly "Pumping Money" into the Market) This sounds a bit aggressive, but the professional term is "Quantitative Easing" (QE). You can imagine it as the market, like a large pond, drying up, and the central bank directly opening the tap to pour water in. How does it work? The central bank "prints money" itself and uses it to buy government bonds, corporate bonds, and other assets from the market. This suddenly leaves banks and institutions that sold the bonds with a large amount of cash, which they can then lend out. The money supply in the market instantly increases. While this is a powerful medicine, it can be life-saving during a crisis.

Second Plan: Fiscal Policy (Direct Government Intervention)

If the central bank is responsible for managing the "tap," then the government is the one directly "spending money" and "collecting money."

Tax Cuts (Collecting Less Money, Leaving More in People's Pockets) This is easy to understand. The government announces tax cuts for everyone, whether it's personal income tax or corporate tax. This means you have more take-home pay each month, and businesses have a lighter burden. The government hopes you'll spend the extra money, and businesses will invest the saved money or give bonuses to employees. In short, it's about finding ways to encourage spending to stimulate consumption and production.
Increased Government Spending (The Government Takes the Lead in Spending) What happens when no one in the market is spending? The government becomes the biggest "buyer"! The most common approach is large-scale infrastructure projects, such as building high-speed railways, airports, roads, and 5G base stations. The government invests large sums of money into these projects, providing work for construction companies, wages for workers, and orders for cement and steel factories. This cycle generates income for many people, making them confident enough to spend, and thus restarting the economic chain.

Additional "Emergency Measures"

Besides the two main conventional weapons mentioned above, facing a "heart attack" situation like a financial crisis, the government might also take some more direct emergency measures.

Direct Bailouts (Providing Transfusions to Critical, Failing Enterprises) For example, when some "too big to fail" banks or financial institutions are on the verge of collapse, the government might directly inject capital to rescue them. These institutions are like the "heart" or "aorta" of the economy; if they fail, the entire national financial system could be paralyzed, with unimaginable consequences. Of course, this practice is highly controversial, as it can feel like using taxpayers' money to save wealthy individuals who made mistakes, but sometimes it's a necessary evil to prevent a larger catastrophe.
Strengthening Regulation (Locking the Stable Door After the Horse Has Bolted, Preventing Future Illnesses) After a crisis, governments typically reflect on why things went wrong. They then introduce a series of stricter financial regulations, imposing "tight restrictions" on banks and financial institutions to curb high-risk speculative activities and prevent them from causing such significant trouble again.

In summary, the government's response to a financial crisis is like a "combination punch," employing both monetary and fiscal policies, along with some temporary emergency measures. The core objective is singular: to restore market confidence. Because in economic activity, confidence is more valuable than gold. Only when people believe the economy will recover, and are willing to spend and invest, can the crisis truly be considered over.