Quantitative easing may work because
A) it eases the strain on the government surplus.
B) on net, this increases the effective quantity of liquid assets in the economy.
C) open market operations always work at the zero lower bound.
D) interest rate increases are not an option.
E) the central bank says they will.

Question

Quizplus · Accepted Answer

Quantitative easing involves the central bank buying government bonds in large amounts, which increases the money supply and effectively increases the quantity of liquid assets in the economy. This can stimulate economic activity and help fight deflation. Options A, C, D, and E are not necessarily true or relevant to the effectiveness of quantitative easing.

Quantitative Easing May Work Because