What is quantitative easing?
Understand the Problem
The question is asking for an explanation of the term 'quantitative easing', which refers to a monetary policy used by central banks to stimulate the economy by increasing the money supply. The approach typically involves the purchase of government securities to lower interest rates and encourage lending and investment.
Answer
A monetary policy where central banks buy securities to reduce interest rates and increase money supply.
Quantitative easing (QE) is a monetary policy strategy where central banks purchase securities to reduce interest rates, increase the money supply, and drive lending to consumers and businesses.
Answer for screen readers
Quantitative easing (QE) is a monetary policy strategy where central banks purchase securities to reduce interest rates, increase the money supply, and drive lending to consumers and businesses.
More Information
Quantitative easing is typically used during periods of low inflation or recession to stimulate the economy by making borrowing cheaper and encouraging spending.
Tips
A common mistake is confusing quantitative easing with traditional monetary policy of altering interest rates directly, which focuses instead on purchasing financial assets to influence the economy.
Sources
- Quantitative Easing (QE): What It Is and How It Works - Investopedia - investopedia.com
- Quantitative easing | Bank of England - bankofengland.co.uk
- What Is Quantitative Easing? - Kiplinger - kiplinger.com
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