Question

What is the most accurate description of the Fed’s policy commonly referred to as Quantitative Easing

	a.	It involves the sale of government securities through the open market
	b.	It is a fiscal policy designed to reduce unemployment
	c.	It involves the Fed Open Market Committee purchase of fed funds
	d.	It is a monetary policy targeted at creating greater market liquidity
	e.	It involves the manipulation of the discount rate to reduce inflation

Answer 1

C. It involves the Fed open market committee purchase of fed funds.

Quantitative easing is a measure taken up by Federal reserve through its federal reserve open market committee.

The committee would purchase federal funds from open market.

The main purpose of this purchase is to increase the money supply in the economy.

It involves purchase of government securities (so A is incorrect).

It does result in reduction of unemployment .

It is not targetted at improving market liquidity.