Quantitative Easing
Central BankingQuantitative Easing (QE) is a monetary policy where central banks purchase government bonds or other securities from the market to increase the money supply and encourage lending and investment. When short-term interest rates are at or approaching zero, central banks use QE to further stimulate the economy.
Real-world example:
Example: During the 2008 financial crisis, the Federal Reserve purchased $4.5 trillion in Treasury bonds and mortgage-backed securities between 2008-2014, flooding the banking system with liquidity to prevent a complete credit freeze.
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