Reference no: EM131743559

DO you agree or disagree?

1. What is quantitative easing?
2. Hasn't the Fed already tried quantitative easing? When? What were the results? Discuss the method of quantitative easing used by the Federal Reserve during the most recent U.S. recession, including any criticisms of this action.
3. Did QE3 help the economy?

Quantitative easing is when the central bank introduces new money into the entire money supply by controlling the growth of money, just enough so there is not too much growth and not too little so it results in inactiveness. In the midst of the financial crisis of 2008 the US Federal Reserve attempted to stimulate economic growth within the economy by using quantitative Easing. Although it is hard to measure the results of quantitive easing, since the financial crisis of 2008 the economy has stabilized in many ways. For example, unemployment has fallen steadily and the value of the dollar has regained strength within the United States. During the most recent recession the method of quantitative easing used by the federal reserve was the central bank created excess money so they had the ability to buy bonds from financial institutions. This process allows banks to reduce interest rates leading to a stimulation in the economy of business and individuals borrowing money from the banks due to these lower interest rates. Through this process individuals are able to spend more money and in turn more jobs are created within the economy. This entire process is designed in an attempt to boost the economy and create growth, essentially pulling the economy out of the recession. One argument of this process is that pumping so much extra money into the economy can lead to inflation.