________ occurs when the Fed creates a large amount of reserves to buy long-term bonds from banks.
A) Quantitative easing
B) Monetary neutrality
C) Money illusion
D) A budget surplus

Question

Quizplus · Accepted Answer

This is a description of quantitative easing, a monetary policy tool that the Fed can use to stimulate the economy. This involves the creation of large amounts of new money by the central bank, which is then used to purchase long-term bonds or other assets. By increasing the supply of money in the economy, the hope is that this will encourage more lending and investment, which can boost economic growth and reduce unemployment.

________ Occurs When the Fed Creates a Large Amount of Reserves