During 2008-2013, the Fed initiated several rounds of "quantitative easing." Under this policy, the Fed
A) increased its purchases of financial assets and thereby injected additional reserves into the banking system.
B) increased its purchases of financial assets, which reduced the reserves available to the banking system.
C) reduced its purchases of financial assets and thereby injected additional reserves into the banking system.
D) reduced its purchases of financial assets and thereby reduced the quantity of reserves available to the banking system.

Question

During 2008-2013, the Fed initiated several rounds of "quantitative easing."  Under this policy, the Fed
A) increased its purchases of financial assets and thereby injected additional reserves into the banking system.
B) increased its purchases of financial assets, which reduced the reserves available to the banking system.
C) reduced its purchases of financial assets and thereby injected additional reserves into the banking system.
D) reduced its purchases of financial assets and thereby reduced the quantity of reserves available to the banking system.

Quizplus · Accepted Answer

During quantitative easing, the Fed increased its purchases of financial assets, such as government bonds, which injected additional reserves into the banking system. This was done to stimulate economic growth and increase lending. By increasing reserves in the banking system, the Fed hoped to encourage banks to lend more money to individuals and businesses, thus boosting economic activity.

During 2008-2013, the Fed Initiated Several Rounds of "Quantitative Easing