ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Money given to people rather than buying bank assets like QE
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Reduces taxes.
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Both 1 and 2
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Less direct than QE
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Detailed explanation-1: -Under QE, central banks create reserves by purchasing bonds or other financial assets, conducting an “asset swap". The swap is reversible. By contrast, with helicopter money, central banks give away the money created, without increasing assets on their balance sheet.
Detailed explanation-2: -Helicopter money, also known as a helicopter drop, refers to an unconventional monetary policy tool of printing large sums of money (expanding money supply) and distributing it to the public to spur economic growth during a recession.
Detailed explanation-3: -Helicopter money does not increase debt, and the interest rate also remains unchanged. This method boosts the economy significantly because it increases the aggregate demand immediately. If a government allows more debt to individuals, it might not spur the economy because the debt needs to be repaid.
Detailed explanation-4: -A rate increase. The Federal Reserve can raise interest rates, which may lead people to invest more of their money, rather than hoard it. A (big) drop in prices. An increase in government spending. Quantitative easing (QE). Negative interest rate policy (NIRP). 04-Feb-2023