Ace the AFP Exam 2026 – Boost Your Financial Wizardry!

Question: 1 / 400

What is meant by "quantitative easing" in economic policy?

A method to reduce budget deficits

A strategy to strengthen currency value

A monetary policy to increase money supply and stimulate the economy

Quantitative easing is a monetary policy designed to increase the money supply to stimulate economic activity, particularly in situations where traditional monetary policy tools have become ineffective. By purchasing government bonds and other financial assets, central banks inject liquidity into the economy, lowering interest rates and encouraging borrowing and investment. This increase in the money supply can lead to increased consumer spending and business investment, ultimately helping to promote economic growth.

In periods of economic downturn or when inflation rates are low, central banks may resort to quantitative easing to kickstart economic activity when conventional methods, such as lowering interest rates, may not yield sufficient results. Thus, option C accurately encapsulates the essence of quantitative easing as a means to stimulate the economy through increased money supply.

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A technique to lower taxes for individuals

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