In macroeconomic theory, what is the term for the policy of central banks purchasing long-term government bonds to inject liquidity directly into the financial system when interest rates are already near zero?

Question 1

Answer · 2026-08-01T17:45:42.946Z

The question describes a specific monetary policy used by central banks: purchasing long-term government bonds to inject liquidity into the financial system when interest rates are already near zero. A. Quantitative easing (QE) is precisely this policy. Central banks use QE to lower long-term interest rates and increase the money supply when conventional monetary policy tools (like adjusting the short-term interest rate) are no longer effective because rates are already at or near zero. B. Fiscal stimulus involves government spending or tax cuts, not central bank bond purchases. C. Sterilisation is a central bank action to offset the impact of foreign exchange interventions on the domestic money supply. D. Open market operations is a general term for central bank buying or selling government securities. While QE is a type of open market operation, "Quantitative easing" is the more specific and accurate term for the described scenario of purchasing long-term bonds when rates are near zero*. The correct option is A. A. Quantitative easing The final answer is A. Quantitative easing What's next?

Question 2

The question describes a specific monetary policy used by central banks: purchasing long-term government bonds to inject liquidity into the financial system when interest rates are already near zero. A. Quantitative easing (QE) is precisely this policy. Central banks use QE to lower long-term interest rates and increase the money supply when conventional monetary policy tools (like adjusting the short-term interest rate) are no longer effective because rates are already at or near zero. B. Fiscal stimulus involves government spending or tax cuts, not central bank bond purchases. C. Sterilisation is a central bank action to offset the impact of foreign exchange interventions on the domestic money supply. D. Open market operations is a general term for central bank buying or selling government securities. While QE is a type of open market operation, "Quantitative easing" is the more specific and accurate term for the described scenario of purchasing long-term bonds when rates are near zero*. The correct option is A. A. Quantitative easing The final answer is A. Quantitative easing What's next?

In macroeconomic theory, what is the term for the policy of central banks purchasing long-term government bonds to inject liquidity directly into the financial system when interest rates are already near zero?

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