Which of the Following Is Not a Mechanism Through Which

question 19

Multiple Choice

Which of the following is not a mechanism through which Quantitative Easing (QE) could affect the wider economy

• A) An announcement effect whereby the mere announcement of a QE programme influences expectations and causes individuals to alter their spending and saving decisions.
• B) A direct spending effect whereby cash given to individuals increases their spending
• C) An excess M0 effect whereby banks are more willing to lend when their cash balances are large
• D) An asset price effect whereby assets purchased through the QE programme tend to rise in price and so influence borrowing and lending decisions in the economy
• E) An inflation expectations effect whereby QE raises expectations of future inflation.

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