What is the primary goal of Quantitative Easing as implemented by a central bank?A.A. Reducing public debtB.B. Encouraging consumer spendingC.C. Balancing the federal budgetD.D. Attracting foreign investment
Question
What is the primary goal of Quantitative Easing as implemented by a central bank?A.A. Reducing public debtB.B. Encouraging consumer spendingC.C. Balancing the federal budgetD.D. Attracting foreign investment
Solution
The primary goal of Quantitative Easing as implemented by a central bank is B. Encouraging consumer spending.
Step 1: Understanding Quantitative Easing Quantitative Easing (QE) is a monetary policy used by central banks to stimulate the economy when standard monetary policy has become ineffective.
Step 2: How it works A central bank implements QE by buying specified amounts of financial assets from commercial banks and other financial institutions, thus raising the prices of those financial assets and lowering their yield, while simultaneously increasing the money supply.
Step 3: The goal of QE The primary goal of QE is to encourage consumer spending. By increasing the money supply, QE aims to reduce the cost of borrowing, increase asset prices and thereby stimulate demand and economic growth.
So, the correct answer is B. Encouraging consumer spending.
Similar Questions
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