Quantitative easing: Difference between revisions
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'''Quantitative easing''' is method of causing [[inflation]] used by [[central bank]]s. The bank adds money to its balance sheet ''ex nihilo'' (out of nothing), and uses the new money to purchase government securities, thus increasing bank reserves, raising the prices of government securities, and lowering their interest rates. It is equivalent to simply printing additional [[legal tender]]. | |||
In 2010, the [[Federal Reserve System|Federal Reserve]] purchased $600 billion in government securities using this method. | |||
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Revision as of 17:03, 15 November 2010
Quantitative easing is method of causing inflation used by central banks. The bank adds money to its balance sheet ex nihilo (out of nothing), and uses the new money to purchase government securities, thus increasing bank reserves, raising the prices of government securities, and lowering their interest rates. It is equivalent to simply printing additional legal tender.
In 2010, the Federal Reserve purchased $600 billion in government securities using this method.