When the central bank pursues a policy of quantitative easing,it:
A) is trying to increase interest rates.
B) is trying to decrease inflation.
C) purchases short-term government securities.
D) purchases long-term debt whose interest rates are significantly above zero.

Question

Quizplus · Accepted Answer

When the central bank pursues a policy of quantitative easing, it purchases long-term debt whose interest rates are significantly above zero. This increases the money supply in the economy, providing banks with excess reserves, which can be used for loaning purposes, and thereby, lowering long-term interest rates. Quantitative easing is used to stimulate economic growth and increase inflation, as well as prevent deflation.

When the Central Bank Pursues a Policy of Quantitative Easing,it