The efficacy of QE is measured with reference to economic growth in terms of percentage rise in
Question:
The efficacy of QE is measured with reference to economic growth in terms of percentage rise in GDP. The theory behind QE is that increased liquidity will encourage more lending, which will lead to greater demand and consumption. This demand will encourage business investments and generate jobs. Logically, these will lead to higher household incomes that will again feed demand. These are the outcomes anticipated from the chain of events QE is supposed to trigger. However, QE's ambivalence in targeting the broad GDP measure is, to some extent, visible in the U.S. where GDP increase has gone hand in hand with stagnant household incomes, while corporate prosperity has risen. How would you explain this?
Please provide a brief and comprehensive response. Thanks!
Macroeconomics Principles Applications And Tools
ISBN: 9780134089034
7th Edition
Authors: Arthur O Sullivan, Steven M. Sheffrin, Stephen J. Perez