According to Krishnamurthy and Foster, (2014) “the federal  reserve stood ready to expand its purchase of agency debt and mortgage-based securities” (p. 4). Besides, it evaluated “the potential benefits of purchasing longer-term treasury security” (p. 4). These were the main catalysts stimulating the economy when QE is applied because the program involves purchase of securities thereby increasing flow of funds, which has effect on consumer credit, businesses, pricing of the assets, and the household wealth. The model has a significant effect on the credit to the consumer because it leads to a reduction on the credit to the businesses and the consumer credit hence increasing cash supply as evidenced when FOMC noted that it was “prepared to provide additional accommodation if needed to support economic recovery” (Krishnamurthy and Foster, 2014; p. 5). The model boosts the spending power and the wealth of the household since it “leads to the rise of asset prices” (Yellen, 2011; p. 7). Besides, it gives the dollar a boost because of the value of the foreign exchange changes moderate

Long-term application of the model has demerits that may have “significant effect on the bank lending, business, inflation, and employment prospects” (FOMC Rate Decision, 2010; p. 6). The model has effect on the strength of the dollar, because it leads to its decline by “changes in the foreign exchange” (Krishnamurthy, & Foster, 2014; p.7). The decline could encourage hoarding of commodity because of the speculations by “economists in forecasting” hence leading to inflation (FOMC Rate Decision, 2010; p. 4). when banks lend for low interest rates for a prolonged duration, they experience pressurized because such rates eradicates profits it could gain from deposits, and are likely “to take credit risks that are likely to threaten its solvency,” (Stein, 2013; p. 1). The net effect of such is the decline in creation of “new ventures and tough economic conditions for the existing venture,” which may result in reducing numbers of employees hence increasing the rate of unemployment (Yellen, 2011; p. 3). The policy creates a scenario that may increase the level of inflation especially if the “banking sector puts the reserves as it did when the economy was tough” (FOMC Rate Decision, 2010; p.5). The main challenge in the banking sector is the unlikelihood for such institution to effect adjustments that curbs excessive circulation of cash in the economy once signs of recovery from the crisis are out.