Under the policy of credit easing,the central bank _______________ in order to reduce interest rate spreads in credit markets during a financial panic.
A) creates central bank reserves for the purchase of financial assets
B) reduces central bank reserves by selling financial assets
C) purchases private-sector financial assets
D) purchases government bonds
E) prints more money.

Question

Quizplus · Accepted Answer

In credit easing, the central bank purchases private-sector financial assets such as corporate bonds, mortgage-backed securities, and commercial paper to increase liquidity in capital markets and reduce interest rate spreads. This is done to ease credit conditions and provide financial stability during a crisis. The central bank does not necessarily print more money or purchase government bonds as in traditional quantitative easing.

Under the Policy of Credit Easing,the Central Bank _______________ in Order