Question

Quantitative easing differed from traditional monetary policy in several key ways. First, it involved the Fed purchasing long-term Treasury bonds, rather than short-term Treasury bills. In 2008, however, it was impossible to stimulate the economy any further by lowering short-term rates because they were already as low as they could get.

(True/False)

Answer 1

Quantitative easing involved the Fed purchasing long term Treasury bonds instead of short term Treasury bills. In 2008, short term rates were already at their lowest point, so quantitative easing was used to lower long-term rates.

Step-by-step explanation:

Quantitative easing differed from traditional monetary policy in several key ways. First, it involved the Fed purchasing long term Treasury bonds, rather than short term Treasury bills. In 2008, however, it was impossible to stimulate the economy any further by lowering short term rates because they were already as low as they could get. Therefore, Chairman Bernanke sought to lower long-term rates utilizing quantitative easing.