Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 15: Q.25 (page 379)

Explain how to use quantitative easing to stimulate aggregate demand.

Short Answer

Expert verified

Quantitative easing should, in theory, lower long-term interest rates while increasing aggregate demand.

Step by step solution

01

Concept of Quantitative Easing 

Quantitative easing is a type of monetary policy in which a government's central bank aims to enhance liquidity in the economy by purchasing long-term state bonds from the government's largest banks.

02

Stimulation of aggregate demand. 

Purchases of long-term bonds and mortgages of private-backed deposits were used to implement quantitative easing. These two activities had a significant impact on the situation. Purchasing long-term deposits at a lower long-term interest rate while dragging tainted investments off of hidden bodies' balance sheets provided power to personal bodies' economic conditions as well as the entire economy. It also helps to stimulate aggregate demand by lowering borrowing costs and lending fees.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

In a program of deposit insurance as it is operated in the United States, what is being insured and who pays the insurance premiums?

Explain what would happen if banks were notified they had to increase their required reserves by one percentage point from, say, 9% to10% of deposits. What would their options be to come up with the cash?

If GDP is 1,500 and the money supply is 400, what is velocity?

In government programs of bank supervision, what is being supervised?

What is a bank run?
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free