A monetary policy tool where a central bank buys large amounts of government bonds and other assets to inject money into the economy. When traditional interest rate cuts are not enough to stimulate the economy, central banks use quantitative easing to increase the money supply and encourage borrowing and spending. It is often used during recessions or severe downturns.
During a severe recession, a central bank might buy $100 billion in government bonds from banks and financial institutions. This puts new cash into the financial system, encouraging banks to lend to businesses and consumers, which can help restart economic activity.
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