Read “Bernanke fiddles while Obama burns”. You will find the piece at CNN Money site http://finance.fortune.cnn.com/2012/06/28/bernanke-trapped/?iid=HP_LN
Answer the following questions:
a) If the Fed were to launch a new round of “quantitative easing”—say a trillion dollar QE3 in line with that suggested in the column, how specifically would the Fed accomplish it? That is, what is the process that the Fed would follow to carry out the QE3?
b) Once the Fed embarked on such a policy, how would it affect banks? This must be specific.
c) How did QE1 and QE2 affect interest rates and the money supply?
d) How would this QE3 most likely affect the money supply and interest rates? Justify your answer!
e) Exactly how would a QE3 affect the overall economy—including jobs, current inflation, inflation outlook, GDP, the housing market, etc.? Again, justify your answer!
The question belongs to Economics and it is a review of the article “Bernanke fiddles while Obama burns”. The article tells about the Federal Reserve’s policies affecting banks, quantitative easing and the effect on the overall economy including GDP, employment, inflation, housing market, etc.
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