ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Low ____ there is not much scope for reducing further
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High ____ there is not much scope for reducing further
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Either A or B
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None of the above
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Detailed explanation-1: -The policy of quantitative easing brings about a fall in the interest rates in the short run. However, in the long run it leads to inflation which causes the interest rates to rise causing the exact opposite of financial stability.
Detailed explanation-2: -QE has supported our aim of having low and stable inflation The largest impact on the economy was probably after the first round (2009). It also had large effects after the UK’s referendum on membership of the EU in 2016, and at the start of the Covid pandemic in spring 2020.
Detailed explanation-3: -QE decreases the yield on all long-term nominal assets, including Treasuries, Agency bonds, corporate bonds, and MBS. ii. The effects are larger effects for longer duration assets. It is important to emphasize that this channel implies an increase in Treasury yields.