Question

1. What is QE (Quantitative Easing)? Explain QE1, QE2, and QE3.

2. Continuation from #2. As a U.S. citizen, what would be the benefits that you can possibly gain given the expansionary monetary policy, such as QE1, QE2, and QE3?

Answer 1

1. Quantitative Easing is an unconventional monetary policy tool in which central banks engage in open market operations by purchasing government securities or other securities from market in order to increase the supply of money in the economy.The expression QE1,QE2 and QE3 describes first,second and third round of Quantitative Easing done by US central banks in 2008,2010 and 2012 respectively.

2. Expansionary monetary policy inject liquidity in the economy thereby increasing the supply of money. Adding money to the system helps in reducing the interest rates and therefore ease down the restrictions for loan applications. Consumers and businesses can easily borrow money from the bank at lower interest rate and this helps in fostering investment and therefore growth in the economy.