Chapter 15, Problem 11P

To determine

The reasons for quantitative easing by the federal reserve by purchasing two trillion of financial assets, The way these purchases are reflected on Fed’s balance sheet and The reason that this quantitative easing did not increase the rate of inflation till 2015.

Concept Introduction:

Quantitative easing is similar to increase in money supply in the economy. Quantitative easing is an expansion of the open market operations by the Federal Reserve to stimulate the economy and making it easier for the businesses to borrow money. The financial crisis in the U.S. in 2007 due to the sub-prime mortgages led to the Federal Reserve to carry out quantitative easing.