Is quantitative easing long run beneficial to an economy?
Understand the Problem
The question is asking whether quantitative easing has long-term benefits for an economy, which involves evaluating the effects of this monetary policy tool over an extended period.
Answer
QE's long-term benefits are unclear, with risks like inflation.
Quantitative easing (QE) can support economic growth in the short run by lowering long-term borrowing costs and supporting spending. However, its long-term benefits are less clear and can involve risks such as potential inflation, asset bubbles, and withdrawal of safe collateral from financial markets.
Answer for screen readers
Quantitative easing (QE) can support economic growth in the short run by lowering long-term borrowing costs and supporting spending. However, its long-term benefits are less clear and can involve risks such as potential inflation, asset bubbles, and withdrawal of safe collateral from financial markets.
More Information
Quantitative easing is mainly used as a tool to help economies recover from recessions by making borrowing cheaper and boosting spending. However, if overused, it might lead to potential drawbacks such as inflation, affecting currency value, and creating asset bubbles.
Sources
- Quantitative Easing (QE): What It Is and How It Works - Investopedia - investopedia.com
- Quantitative Easing: Considering Its Benefits and Drawbacks - sites.lsa.umich.edu
- Quantitative easing - Wikipedia - en.wikipedia.org
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