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Quantity Expansion (QE) of Money in the European Union (EU) On March 9 2015, the European Union (EU) commenced quantity expansion of money, Euro ()....
a. Quantity Expansion (QE) of Money in the European Union (EU)
On March 9 2015, the European Union (EU) commenced quantity expansion of money, Euro (€). The European Central Bank (ECB) has increased the quantity of money by 60 billion euro every month in the open market in an attempt to support the economy of EU countries. The large increase in the quantity of money is expected to have significant impacts on a range of economic sectors in the EU and global financial markets.
1. Analyse how the quantity expansion of euro money is likely to affect money supply, interest rate, investment and consumption, and economic growth in the EU. Draw relevant graph(s) for your analysis.
2. Discuss how the quantity expansion of euro money would change the value of euro, exchange rate (depreciation or appreciation) against other currencies, and exports and imports in the EU. How would this contribute to EU's current account balance and would this improve the competitiveness of the EU economy in the global market?
b. Exchange Rate and Balance of Payments
