Understanding Quantitative Easing

The video explains quantitative easing in the context of the U.S. financial crisis, focusing on Ben Bernanke's approach. It describes how the Federal Reserve expands its balance sheet by printing money and buying assets, affecting interest rates and credit conditions. The video contrasts traditional quantitative easing, which focuses on increasing bank reserves, with the Fed's credit easing, which targets specific assets to influence economic conditions. The Fed's strategy aims to provide liquidity and ease financial stress in targeted areas of the economy.

What is the main difference between 'credit easing' and 'quantitative easing' as discussed by Ben Bernanke?

• Credit easing is a method used exclusively by the Bank of Japan.

• Credit easing is concerned with the composition of assets held by the central bank.

• Credit easing involves the expansion of the central bank's balance sheet.

• Credit easing focuses on the quantity of money printed.

How does the Federal Reserve traditionally influence short-term interest rates?

• By selling assets to the market.

• By buying long-term debt.

• By decreasing the amount of currency in circulation.

• By increasing the amount of currency in circulation.

In a pure quantitative easing regime, what is the primary focus?

• The amount of cash in circulation.

• The interest rates on corporate debt.

• The quantity of bank reserves.

• The composition of loans and securities.

What was the main focus of the Bank of Japan's policy during their quantitative easing period?

• The interest rates on mortgage-backed securities.

• The composition of assets.

• The amount of cash in circulation.

• The target for bank reserves.

How does the Federal Reserve's credit easing approach differ from Japan's quantitative easing?

• It focuses solely on increasing bank reserves.

• It is only concerned with short-term interest rates.

• It targets specific sectors to improve credit conditions.

• It does not involve buying any assets.

What is a yield curve?

• A graph showing the relationship between interest rates and different maturities.

• A chart depicting the amount of money printed by the central bank.

• A diagram illustrating the balance sheet of a corporation.

• A table listing the interest rates of various banks.

What happens to the yield spread when the Federal Reserve intervenes by buying longer-term treasury debt?

• The yield spread narrows.

• The yield spread widens.

• The yield spread disappears.

• The yield spread remains constant.

Why does the Federal Reserve buy highly rated mortgage-backed securities?

• To increase the amount of cash in circulation.

• To reduce the central bank's liabilities.

• To decrease the interest rates on these securities.

• To increase the interest rates on these securities.

What is the effect of the Federal Reserve paying more for a certain amount of debt?

• The interest rates on that debt increase.

• The interest rates on that debt decrease.

• The amount of debt decreases.

• The amount of debt increases.

What does Ben Bernanke emphasize about the Federal Reserve's approach to quantitative easing?

• It focuses on the amount of cash printed.

• It targets specific assets to influence credit conditions.

• It does not involve any asset purchases.

• It is identical to Japan's approach.