Which one of the following best describes the term ‘Quantitative Easing’?
[amp_mcq option1=”It is a policy tool used by central banks to inject liquidity into the financial system.” option2=”It is a policy tool used by governments to stimulate economic growth.” option3=”It is a monetary policy tool used to control inflation.” option4=”It is a fiscal policy tool used to reduce government debt.” correct=”option1″]
This question was previously asked in
UPSC CAPF – 2010
– It involves the central bank purchasing long-term securities from the open market to increase the money supply and encourage lending and investment. This injects liquidity into the financial system.
– It is distinct from traditional monetary policy aimed solely at controlling inflation via interest rates, and it is not a fiscal policy tool used by the government.