The Federal Reserve engages in another round of quantitative easing. What are the effects of this policy on the economy?(1 point)

Question

Responses

Banks have more funds to issue loans to consumers and businesses, which increases consumer and business spending, employment, and economic growth.
Banks have more funds to issue loans to consumers and businesses, which increases consumer and business spending, employment, and economic growth.

The rate of inflation decreases as the money supply decreases, which slows economic growth and increases unemployment.
The rate of inflation decreases as the money supply decreases, which slows economic growth and increases unemployment.

Banks do not have as much funds to issue loans to consumers and businesses, which decreases consumer and business spending, and slows economic growth.
Banks do not have as much funds to issue loans to consumers and businesses, which decreases consumer and business spending, and slows economic growth.

The rate of inflation decreases as the money supply increases, which causes an increase in consumer spending, employment, and economic growth.

Answer 1

The correct response is:

Banks have more funds to issue loans to consumers and businesses, which increases consumer and business spending, employment, and economic growth.

Quantitative easing (QE) typically involves the central bank purchasing government securities or other financial assets to inject liquidity into the economy. As a result, banks have more funds available to lend, which can stimulate borrowing and spending, leading to increased economic activity and job creation. The increase in the money supply can also lead to higher inflation over time, but the immediate effects of QE focus on enhancing economic growth and lowering unemployment.