In terms of the mechanics of quantitative easing,
A) quantitative easing formally changes interest rates; open-market operations only inﬂuence rates.
B) it works the same as open-market operations.
C) it differs from open-market operations in that the securities purchases occur directly from households.
D) it only changes the interest rate; it doesn't inﬂuence bank reserves.

Question

Quizplus · Accepted Answer

Quantitative easing works the same as open-market operations, in which central banks buy securities from banks in exchange for credit, thus increasing the amount of money in circulation and lowering interest rates. However, quantitative easing typically involves buying longer-term securities and sometimes also involves buying securities directly from the government or other institutions outside of the banking system. It does not formally change interest rates, but rather aims to influence them indirectly through the increased supply of money.

In Terms of the Mechanics of Quantitative Easing