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The Federal Reserve Large Scale Assets Purchase has a short term and long term effect on...

The Federal Reserve Large Scale Assets Purchase has a short term and long term effect on the whole economy. Explain                                                                          

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Answer #1

The FOMC executes large scale asset purchase in the market which has both the short term and long term effects in the market and economy.

The Federal reserve's Long term asset purchase programs were successful at lowering the long term borrowing rates and hence have a simulating effect on the economy.The effect of this is particularly seen in the mortgage market, Treasury securities, corporate bonds and interest rate swaps.

The LSAP, till now were discreate in nature, in that the broad charateristics of the programs involved carrying out those decisions, with little responsiveness to the changes in economic and financial outlook.   

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