Quantitative Easing is when the central bank purchases ______ from the private sector, in an attempt to ______ _______

Quantitative Easing (QE) is when the central bank purchases government bonds from the private sector, in an attempt to increase money supply.

This monetary policy tool is used primarily to stimulate the economy when traditional monetary policy, such as lowering interest rates, becomes ineffective, often because rates are already near zero. By purchasing government bonds, the central bank injects liquidity into the banking system, which can encourage banks to lend more freely, thereby reducing interest rates on loans for individuals and businesses. This process is intended to promote increased spending and investment, ultimately contributing to economic growth and preventing deflation.

Furthermore, by increasing the money supply, QE aims to support the stability of financial institutions and improve their balance sheets, which can also help to bolster consumer confidence and spending.