The effect of quantitative easing is to:
A)lowering bond prices and thus reduce interest rates.
B)raising bond prices and thus increase interest rates.
C)raising bond prices and thus reduce interest rates.
D)lowering bond prices and thus increase interest rates.

Question

Quizplus · Accepted Answer

Quantitative easing involves the purchase of government bonds by a central bank, which leads to an increase in demand for these bonds and their prices. This, in turn, decreases the yields on these bonds and reduces interest rates. Therefore, the effect of quantitative easing is to raise bond prices and reduce interest rates.

The Effect of Quantitative Easing Is To