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Business Democratic

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Submitted By quangdo95
Words 664
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It cannot be denied that from past to now the economic world has suffered a lot of crises such as the East Asian financial crisis in 1997, the 2000s energy crisis and especially the global financial crisis in 2008 which had a significant impact on the world economy until now. Generally, the financial recession of 2007-2008 damaged whole economy of the world and caused the steady rise in unemployment rate. Thus, people lost the confidence on saving and spending which lead to the reduction of money supply. As a result, the government had to reduce the interest rate to encourage people saving. However, the rate of interest below 0% was not good for the economy therefore the Central Bank decided to apply the quantitative easing, which was considered as a unconventional policy, to boost the economy. Even though, everything always has good and bad sides and quantitative easing is not exception.

“Quantitative easing is a process whereby a Central Bank, such as the Bank of England, purchases existing government bonds (gilts) in order to pump money directly into the financial system” (Economics Online, 2012). The Central Bank could print more money and fund their debt account for buying assets from other financial institutions such as Banks and firms. By receiving money from Central Bank, these institutions will have more cash that lead to the benefits for people and the economy. Firstly, firms with higher budget now could employ more people for the vacancies, which can reduce the employment rate by the extra money. Secondly, Banks could be encouraged to lend money with low rate that can help people to be more confident in saving and spending and develop the businesses. As a result, the growth in money supply will stimulate the economy to recover after crisis period. Thirdly, increasing in saving and spending of people will lead to the raise in aggregate demand hence move

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