When the Fed uses quantitative easing, it is
[ Select ]
buying
selling

[ Select ]
long-term government debt
Treasury bills
:

Question

When the Fed uses quantitative easing, it is 
[ Select ]
buying
selling
 
[ Select ]
long-term government debt
Treasury bills
 :

BlackTom AI · Accepted Answer

The question presents two dropdowns to complete the statement about quantitative easing (QE) and requires filling in both blanks with correct options.
Option for the first blank: The Fed's QE program involves actions in which it primarily engages in asset purchases to inject liquidity. The two possible choices are buying or selling; QE is associated with buying assets, not selling, so the correct selection is buying.
Option for the second blank: The types of assets targeted by QE are longer-maturity securities in order to affect long-term interest rates. The choices are long-term government debt and Treasury bills; QE focuses on longer-term government debt (such as longer-maturity Treasuries) rather than short-term instruments like T-bills, so the correct selection is long-term government debt.
Explaining why the incorrect options are not correct:
- If you chose selling for the first blank, that would imply the Fed is reducing its balance sheet or tightening monetary policy, which is the opposite of QE.
- If you chose Treasury bills for the second blank, that would imply QE targets very short-term securities. In practice, QE aims to lower long-term interest rates by purchasing longer-dated securities, not short-term bills, so this would misrepresent the policy tool and its intended effect.
- If you chose long-term government debt in combination with selling for the first blank, it would describe an inconsistent or contradictory policy stance, since selling long-term debt would reduce liquidity and counter QE goals.
- If you selected buying in the first blank but Treasury bills in the second, that would mix a purchase action with a short-term security, which does not align with the conventional QE focus on longer maturities; the standard QE mechanism buys longer-dated securities to push down long-term yields.
In summary, QE is about buying (not selling) assets, specifically targeting long-term government debt (not short-term Treasury bills) to influence longer-term interest rates and promote lending and investment.

ECON 201 Sections 2 & 3, Winter 2025 14 Case Study Monetary Policy

When the Fed uses quantitative easing, it is [ Select ] buying selling [ Select ] long-term government debt Treasury bills :

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