Question

*What is quantitative easing (QE)?

*What are the benefits of this new monetary tool?

*What groups of people in the economy are hurt by QE, and why?

Answer 1

1. Quantitative easing is an unconventional monetary policy. The central bank purchases securities from market inorder to lower interest rates.

It increases money supply

It is a measure used when short term interest rates are approaching zero.

2. Benefits :

• Reduces bond yields on government debt
• Increases money supply
• Increases bank reserves of commercial banks
• It does not allow currency manipulation
• Lower interest rates that cut back on growth

3. The quantitative easing monetary policy has disastrous effects on savers and pensioners because the government can confiscate secretly or unobserved, an important part of the wealth of their citizens.