Quantitative easing refers to:
A)the selling of bonds to the private sector by a country's central bank in order to ease the money supply.
B)the purchasing of private sector assets by a country's central bank in order to provide liquidity to the financial system.
C)the selling of bonds by a country's central bank to the private sector in order to provide liquidity.
D)the purchasing of private sector assets by a country's central bank in order to tighten liquidity.

Question

Quizplus · Accepted Answer

Quantitative easing is a monetary policy in which a central bank purchases securities from the open market to increase the money supply and provide liquidity to the financial system. The securities purchased can include both government bonds and private sector assets. Therefore, option B is the correct description of quantitative easing. Options A and C are incorrect because they describe the selling of bonds, which would reduce the money supply and liquidity. Option D is also incorrect because quantitative easing is meant to increase liquidity, not tighten it.

Quantitative Easing Refers To