Project #156707 - Economics Post for Response

Business Tutors

Subject Business
Due By (Pacific Time) 11/27/2016 11:30 pm

2 person response In APA format. 1/2 per response. Maximum of 1 page

 

 

(1) Post for Response to (SL)

 

Quantitative easing (QE) is a method that the central banks can use to increase economic activity to stimulate growth, by purchasing securities from banks using money that it creates electronically.  By doing this, the required reserves for the banks would increase, which means that the banks can approve more loans.  It can also cause a decrease in interest rates for loans, which increases consumer spending and loan activities, which creates more jobs, which results in...economic growth. 

The first round of QE in the U.S. was in 2009, the QE2 followed in 2010, as did QE3 in 2012, which expired in 2014.  According to Investopedia, "The QE has proven to be a very successful boost to asset prices but a very ineffective policy in terms of productivity and standards of living."  In other words, while QE had a positive effect on stock prices, it did little increase productivity, wages, etc.   

 

Sean Ross. "Quantitative Easing Report Card in 2016." Investopedia. February 11, 2016.  Retrieved from http://www.bbc.com/news/business-15198789  

"What is quantitative easing?" BBC. August 4, 2015.  Retrieved from http://www.bbc.com/news/business-15198789  

"What is quantitative easing?" The Economist. March 19, 2015. Retrieved from http://www.economist.com/blogs/economist-explains/2015/03/economist-explains-5  

 

(2) Post for Response to (JS)

 

Quantitative easing is when the federal reserve “prints more money” and uses this money to buy assets such as government bonds. Doing this add liquidity to market and reducing interest rates. The goal is to encourage lending which hopefully leads to boost in economic activity. The Fed has tired QE three times in recent history. QE1 Dec 2008 it purchased $800B in bank debt, U.S. Treasury notes and mortgage-backed securities (MBS) from member banks. QE2 Nov 2010, the Fed would increase quantitative easing, buying $600B of Treasury securities by the end of the second quarter of 2011. QE3 Sept 2012 the Fed agreed to buy $40 billion in MBS, and continue Operation Twist, adding a total $85 billion of liquidity a month. In addition it would keep Fed fund rate at zero until 2015, keep purchasing securities until jobs improved "substantially", and acted to boost the economy, not avoid a contraction. So has the QE worked? If you look at short terms goals one could answer yes, unemployment rate has return to 5% and economic growth has increased. However was the return on QE sufficient given the investment? Critics of QE say the system is now dependent and would expect this type of assistance moving forward.

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