Fichas
Quantative Easing
Fichas del conjunto (11)
- 1What is Quantitative Easing?The process of buying back government bonds by the government. (This is also known as the nuclear option.)
- 2Give one real life example of this being implementedThe UK during the 2008 crisis were worried about deflation
- 3Give a breakdown of first 3 steps of how QE works1. The central bank electronically creates money for the government
2. The government uses this to buy back all bonds issued on the bond market.
3. This causes an increase in demand for bonds, causing the price to go up. - 4Give a breakdown of how the rest of this process works4. The rise in price level means the yield for a bond will go down disincentivizing firms to save money in financial markets.
5. This will cause firms to spend thus increasing aggregate demand and reducing chance of inflation. - 5Give another reason why AD will rise through QEThis extra money in the economy will increase the money supply and banks will then lower interest rates incentivizing people to borrow and invest making AD rise.
- 6How to calculate the yield of a bond?(Coupon/Market Price) x 100
- 7Relationship between bond prices and interest rates/yieldAs the yield falls the market price of the bond goes up
- 8Nominal Value DefinitionThe value of the bond being issued by the government
- 9Coupon DefinitionThe annual rate of interest the government must pay back to the current owner of the bond, this stays fixed.
- 10Maturity DateThe date by which the bond must be paid back by the government
- 11How are the nominal value, coupon and maturity date inter-related?The nominal value is the value the bond is sold for and with it is the coupon (fixed interest). Then the maturity date is when the government must pay back.
Información
- Descripción
- Quantative Easing and impact on economy as well as bonds
- Creado por
- Paarth Agarwal
- Visitas
- 2
- Valoración