What is quantitative easing?
Understand the Problem
The question is asking for an explanation of quantitative easing, a monetary policy used by central banks to stimulate the economy. It involves increasing the money supply by purchasing government securities or other financial assets to lower interest rates and encourage lending and investment.
Answer
Quantitative easing involves central banks buying securities to lower interest rates and stimulate the economy.
Quantitative easing (QE) is a monetary policy strategy where central banks purchase securities to lower interest rates, increase money supply, and boost lending to stimulate economic activity.
Answer for screen readers
Quantitative easing (QE) is a monetary policy strategy where central banks purchase securities to lower interest rates, increase money supply, and boost lending to stimulate economic activity.
More Information
Quantitative easing is used primarily during periods of low inflation or recession to encourage spending and investment when traditional monetary tools have become ineffective.
Tips
A common mistake is confusing quantitative easing with conventional monetary policy methods, like lowering short-term interest rates. QE targets long-term rates by purchasing financial assets.
Sources
- What Is Quantitative Easing? - Kiplinger - kiplinger.com
- Quantitative easing (QE) | Definition & Facts | Britannica Money - britannica.com
- Quantitative easing | Bank of England - bankofengland.co.uk
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