ECONOMICS
MONETARY POLICY
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Lowering the interest rate at which commercial banks lend to each other
|
|
|
Decreasing the supply of money in the economy
|
|
|
Increasing the supply of money in the economy
|
|
|
When a central bank reduces interest rates
|
Detailed explanation-1: -What is Quantitative Easing? 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: -The Bank of Japan however only introduced QE from March 19, 2001, until March 2006, after having introduced negative interest rates in 1999. Most western central banks adopted similar policies in the aftermath of the great financial crisis of 2008. In modern times, it is widely referred to as printing money.
Detailed explanation-3: -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-4: -This is QE, and it is expansionary monetary policy on steroids. QE is distinguished from conventional expansionary policy by: the greater range of financial assets that are purchased (now including longer term government bonds);
Detailed explanation-5: -Quantitative easing-QE for short-is a monetary policy strategy used by central banks like the Federal Reserve. With QE, a central bank purchases securities in an attempt to reduce interest rates, increase the supply of money and drive more lending to consumers and businesses.