Quantiative Easing Essay

Economic Issues Concerning Quantitative Easing

Clay Saa

Miami Dade College

Introduction

One of the important components of business is understanding the benefits and drawbacks of efforts in business and the economy. The issues surrounding business and economic efforts can have long-term, significant effects whether the policy implemented is in a small business or the Federal Reserve. These issues are particularly important to address when examining government initiatives. When a government implements a policy or initiative to boost the economy or reduce financial pressures, the government must have a strong understanding on how the negative effects of the implemented policy can impact not only the government and overall economy, but the individual people and families in the nation.

On an individual level, understanding the economic issues surrounding policies and initiatives can help individuals and organizations better prepare for the effects and manage obstacles that may arise after implementation. Not only can individuals then prepare for what might happen, but they will understand why there are certain changes within the economy with the implementation of policies and initiatives. The purpose of this essay is to examine three issues that rise in the Federal Reserve policy known as Quantitative easing.

Quantitative Easing

Quantitative easing is meant to improve economic status. According to Investopedia (n.d.), it is “[a]n unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply” (para. 1). Increasing the money supply is accomplished through the increase of capital in financial institutions to promote increased liquidity and lending, and is only considered when short-term interest rates are near or at zero (Investopedia, n.d.).

By lowering interest and boosting stock prices, investment interest increases, which benefits the...