The purchase of financial assets by the central bank through the creation of excess reserves for banks is known as ________.
A) quantitative easing
B) conditional statements about the future path of the policy rate
C) interest rate expectations
D) credit easing

Question

Quizplus · Accepted Answer

The purchase of financial assets by the central bank through the creation of excess reserves for banks is known as quantitative easing. This is a monetary policy tool that is used to increase the money supply and stimulate economic growth. The central bank purchases long-term government bonds or other securities from banks and in exchange provides them with additional reserves, which they can use to make more loans and increase spending.

The Purchase of Financial Assets by the Central Bank Through