Extended Essays 2021

level. However, it continued to climb and doubled to 4.2 in a month, and continued to grow.

Contrary, the easing monetary policy in 2008 did not lead to significant inflation.

Furthermore, since the Federal Reserve intervened in the monetary policy to purchase a huge

number of bonds in three months, compared to the slow policy in 2008, it resulted in a rapid

decrease in the size of capital in circulation, which affects a certain extent the trading activity.

Moreover, since a large amount of capital flow will usually lead to severe inflation, the rapid

release of funds in 2020 may lead to a significant increase in credit activities, which will

drive up the inflation rate.

Besides, the withdraw of the monetary policy may trigger turmoil in the global financial

market. As unconventional policies, quantitative easing and reduction of interest rates need to

be gradually withdrawn with the economic recovery and financial stability. Like the 1-year

interest rate reduction policy and the 6-year quantitative easing policy adopted in 2008 for the

economic crisis. Due to the relatively dispersed funds, the launch of the policy will not

impact the existing economic situation. However, the fast and large amounts invested policy

in 2020 is different. Once the new policy withdraws, it will bring about capital return,

exchange rate depreciation against the U.S. dollar, asset bubbles, and other problems. This

could lead to a deterioration of the Fed's balance sheet. For example, the current high asset

purchase price of the Federal Reserve may lead to foam problems. Once interest rates rise,

the Federal Reserve may face greater asset losses and may also break the bond market

bubble.

However, the quantitative easing policies and the Reserve interest rate in 2020 are far lower

than that in 2008. The economic crisis in 2008 is still a habitual pattern of easing for a long

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