Quantitative easing may work because
A)interest rate increases are not an option.
B)on net, this increases the effective quantity of liquid assets in the economy.
C)the central bank says they will.
D)open market operations always work at the zero lower bound.
E)it eases the strain on the government surplus.

Question

Quizplus · Accepted Answer

Quantitative easing increases the effective quantity of liquid assets in the economy by purchasing government bonds and other securities from banks, which in turn increases the banks' reserves and ability to lend. This can help stimulate economic growth and increase inflation. While interest rate increases may not be an option at the zero lower bound, the effectiveness of quantitative easing is not solely dependent on the central bank's statements or open market operations. It may or may not ease the strain on the government's surplus, depending on the specific circumstances.

Quantitative Easing May Work Because