What is quantitative easing?
Understand the Problem
The question is asking for an explanation of quantitative easing, which is a monetary policy tool used by central banks to stimulate the economy by increasing the money supply and lowering interest rates. The response should include how it works and its potential effects on the economy.
Answer
Quantitative easing is a monetary policy where central banks buy securities to lower interest rates and increase money supply.
Quantitative easing (QE) is a monetary policy strategy used by central banks to reduce interest rates and increase the supply of money by purchasing securities. This strategy encourages more lending and economic activity.
Answer for screen readers
Quantitative easing (QE) is a monetary policy strategy used by central banks to reduce interest rates and increase the supply of money by purchasing securities. This strategy encourages more lending and economic activity.
More Information
QE is used to stimulate the economy when standard monetary policy becomes ineffective. It lowers long-term interest rates and boosts the money supply, potentially spurring borrowing and expansion.
Tips
A common mistake is confusing QE with printing money directly. QE increases reserves for banks, enabling more lending, rather than directly increasing cash in circulation.
Sources
- Quantitative easing - Wikipedia - en.wikipedia.org
- Quantitative Easing (QE): What It Is and How It Works - Investopedia - investopedia.com
- Quantitative easing - Forbes - forbes.com
