Which of the following is an example of an "unconventional monetary policy" by a central bank?
A) the purchase of specific categories of assets with new money
B) the sale of long-term government bonds for foreign exchange
C) the purchase of long-term government bonds using foreign exchange
D) raising reserve requirements by commercial banks
E) selling gold reserves

Question

Quizplus · Accepted Answer

The purchase of specific categories of assets with new money, such as buying corporate bonds or mortgage-backed securities, is an example of unconventional monetary policy. This is known as quantitative easing, and it is typically used when conventional monetary policy tools like interest rate adjustments have been exhausted. The purpose is to increase the money supply and encourage lending and investment in the economy.

B, C, D, and E are examples of conventional monetary policy measures. B and C involve the sale and purchase of government bonds, respectively, which are common tools used by central banks to influence interest rates and the money supply. D involves adjusting reserve requirements for commercial banks, which can also impact the money supply. E involves selling gold reserves, which can affect the central bank's foreign exchange reserves but is not typically used as a monetary policy tool.

Which of the Following Is an Example of an "Unconventional