Aqa A Level Economics 2023 Paper 2 Study Guide Rated A+

Explain how QE can help low inflation/deflation, using the case study. {Ans: After 2009, the economy avoided deflation with the lowest average inflation rate of 1.2% (2014-2017) and this was still inside the acceptable target range of 2%+/-1%}Continued (QE) {Ans: • considering the limitations of QE such as: o when bond yields are low, there is little scope for further reduction o the possibility of being in a liquidity trap o money hoarding by financial institutions o bonds may have been held by foreign investors, therefore they may not directly stimulate the UK economy • the role of fiscal policy and decisions by the government such as austerity • consideration of the word 'continued' and although QE may/may not have been successful in the past it is not guaranteed to be/not be successful in the future • considering other ways that the Bank of England can use instruments such as Bank Rate, forward guidance, operational independence and forecasting to influence the macroeconomy.}What is QE? {Ans: QE involves us buying bonds to push up their prices and bring down long-term interest rates. In turn, that increases how much people spend overall which puts upward pressure on the prices