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

Question

Responses

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 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.

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 most accurate response regarding the effects of another round of quantitative easing (QE) by the Federal Reserve is:

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

Quantitative easing typically involves the Federal Reserve purchasing government securities in order to inject liquidity into the economy. This increases the money supply, lowers interest rates, and encourages banks to lend more, leading to increased spending and investment which can stimulate economic growth.