Unlimited bond-buying program in the U.S.

//Unlimited bond-buying program in the U.S.

Unlimited bond-buying program in the U.S.

CNN: Fed takes emergency action to stave off a depression

Article published: March 23, 2020

IB Economics syllabus: Macroeconomics (expansionary monetary policy)

In an effort to “prevent the health crisis from turning into a full-blown financial crisis” the U.S. central bank (the Fed) has announced an unlimited bond-buying program, also known as an “open-ended quantitative easing.” This means that the Fed will continue to pump money into the economy in a n attampt to do “whatever it takes” “to support small- and medium-sized businesses.” Thus, this can be regarded an an all-out expansionary monetary policy, which is aimed at boosting aggregate demand during these hard times caused by the coronavirus. As you can imagine AD is basically collapsing with consumption, investment and net exports plummeting, so central banks and governments do everything they can, to keep their economy running and to avoid another Financial Crisis.

Also, the U.S. government is planning to come up with a fiscal stimulus package (expansionary fiscal policy) of $2000 billion to same the American economy from collapsing. I will post about it too, once the decision is made.

Source of image: Mandel Ngan / AFP via Getty images

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By | 2020-04-07T06:44:20+00:00 March 25th, 2020|Macro|Comments Off on Unlimited bond-buying program in the U.S.

About the Author:

My name is Daniel Szekely and I work as an IB Economics tutor, examiner and teacher. Having earned an MA degree in Economics at the University of Aberdeen, I started my career as a financial analyst at Morgan Stanley, one of the largest investment banks of the world. Yet, despite the promising career prospects of the banking industry, I decided to make a larger social impact by becoming a teacher. Currently, I teach IB Economics at SEK Budapest International School and have been an examiner for over 6 years. I started EconDaddy as a simple blog to share great articles with my students and others taking IB Economics around the world to use for their commentaries. Being a practicing IB Economics tutor, I have first hand insight into the most common mistakes of students, so the EconDaddy blog now also provides exam and commentary writing tips.

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