Friday, 4 April 2014

Quantitative easing

Quantitative easing is the creation of new money by the central bank in the form of loans to commercial banks that does not result in an increase in inflation. A central bank increases commercial banks´ reserves with the central bank by means of valid loans that have to be paid back by the commercial banks. The commercial banks, having more reserves with the central bank, then increase loans to businesses and consumers which boost economic activity in a non-inflationary way.

Nicolaas Smith 

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