Evaluate the effectiveness of quantitative easing during ‘a significant recession’
Edexcel A-Level Economics 25 Mark Question
The European Central Bank introduced a new round of quantitative easing (QE) in March 2020, purchasing up to €750 billion of assets. The objective of this QE was to reduce the serious risks to the effectiveness of monetary policy resulting from a significant recession. The European Central Bank’s target for inflation remains at ‘below but close to 2%’. Evaluate the effectiveness of quantitative easing during ‘a significant recession’. (June 2021)
Plan
- Paragraph 1
- Argument: QE is effective because it can stimulate economic growth
- Diagram: right shift in AD
- Evaluation: effectiveness can depend on the size of the multiplier
- Paragraph 2
- Argument: QE is especially useful due to the limitations of traditional monetary policy
- Diagram: money supply diagram (optional)
- Evaluation: business confidence
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