Q. Consider the following statements regarding Taper tantrum:
1. It is the gradual reduction of monthly purchase of assets by federal reserve.
2. This step is similar to quantitative easing.
Which of the above statements is/are correct?
Answer: A
Notes:
Statement 1 is correct: Tapering is gradual reduction of monthly purchase of assets by federal reserve. It marks the revival of tight monetary policy.
Statement 2 is incorrect: Tapering is done after the process of Quantitative easing. Quantitative easing is used to bring back economy to revival path from slowdown
Source: Article
