What is quantitative easing?
Understand the Problem
The question is asking for an explanation of the economic concept of quantitative easing, which involves the central bank purchasing government securities or other securities to increase the money supply and encourage lending and investment.
Answer
QE is a monetary policy where central banks buy financial assets to lower interest rates and increase money supply.
Quantitative easing (QE) is a monetary policy used by central banks to stimulate a nation's economy by purchasing financial assets, such as government bonds, to lower interest rates and increase the money supply, encouraging lending and investment.
Answer for screen readers
Quantitative easing (QE) is a monetary policy used by central banks to stimulate a nation's economy by purchasing financial assets, such as government bonds, to lower interest rates and increase the money supply, encouraging lending and investment.
More Information
Quantitative easing is generally used when standard monetary policy has become ineffective. It is considered 'unconventional' because it occurs after interest rates have already been lowered near zero and can't be reduced further.
Tips
A common mistake is assuming QE directly injects money into the economy like fiscal spending; it rather encourages lending and spending indirectly.
Sources
- Quantitative easing - Wikipedia - en.wikipedia.org
- Quantitative Easing (QE): What It Is and How It Works - Investopedia - investopedia.com
- Quantitative easing | Bank of England - bankofengland.co.uk
