Economics Monetary Policy Questions
Quantitative easing is a monetary policy tool used by central banks to stimulate the economy when traditional methods, such as lowering interest rates, are no longer effective. It involves the central bank purchasing government bonds or other financial assets from commercial banks and other financial institutions. This increases the money supply and injects liquidity into the economy, with the aim of lowering long-term interest rates, encouraging borrowing and investment, and boosting economic activity. The goal of quantitative easing is to stimulate economic growth, increase inflation, and prevent deflation during times of economic downturn or recession.