Question

Explain what Quantitative Easing means, how it works, where and when this policy was used. Was QE an appropriate policy option? Can you suggest a different policy that could be used by the Fed or the Government to address the same problem?

Answer 1

Quantitative easing(QE) is a expansionary monetary policy. In this case the central bank buys previously determined amounts of government bonds or other financial assets (This will make money available with financial agencies to go up) in order to inject money directly into the economy.QE encourage investors and people to borrow more and spend more and hence aggregate demand increases generating more jobs in an economy.

This policy was used by fed after 2008 as recession striked US economy post subprime crisis.

i think yes, it was a appropriate policy action as in 2019, USA unemployment is very low, inflation is in control and GDP is also growing at a moderate rate.

Govt. In my opinion should focus more on supply side policy as it aims to economic growth.

These policies(supply side) are of two types- Market based and interventionist based.

In market based- labor market reforms, encouraging competition and creating a business friendly environment is involved. In Interventionist based policy focus is on creating human and physical capital. If this capital is supporting the policies implemented by govt and central bank then policy conflicts can be lowered and long run solid development can be achieved.