ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Quantitative easing (QE) is a monetary policy of printing money, that is implemented by the Central Bank to energize the economy. The Central Bank creates money to buy government securities from the market in order to lower interest rates and increase the money supply.

Detailed explanation-2: -Quantitative easing (QE) is one of the tools we use to meet our 2% inflation target. QE lowers long-term borrowing costs to support spending in the economy and hit the inflation target.

Detailed explanation-3: -Quantitative easing entails the creation of new bank reserves that are used to purchase government bonds (for example, from pension funds). This increases bond prices, which reduces bond yields and lowers interest rates in the real economy. Quantitative easing is often described as ‘printing money’.

Detailed explanation-4: -Quantitative easing is a type of monetary policy in which a nation’s central bank tries to increase the liquidity in its financial system, typically by purchasing long term government bonds from that nation’s largest banks and stimulating economic growth by encouraging banks to lend or invest more freely.

Detailed explanation-5: -Using QE to add new money to the economy sets a powerful chain of events in motion: The Fed creates credit. The central bank adds credit (money) to the banking system by creating bank reserves on its balance sheet. This is sometimes referred to as the Fed “printing money."