What does Quantitative Easing aim to achieve?

Quantitative Easing (QE) is a monetary policy used by central banks to stimulate the economy when standard monetary policy has become ineffective, typically in situations of very low interest rates. The primary goal of QE is to increase the money supply in the economy, which is achieved by the central bank purchasing financial assets, such as government bonds, from commercial banks and other financial institutions.

By doing so, QE lowers interest rates and makes borrowing cheaper, thereby encouraging spending and investment. This increase in the money supply can lead to higher consumption and investment, which, in turn, stimulates economic activity and helps to support job creation. Furthermore, a growing economy can help in stabilizing or increasing inflation rates, particularly when inflation is below the target level set by the central bank.

The correct answer highlights that the primary objective of Quantitative Easing is to stimulate the economy through an increase in the money supply, positioning it effectively as a countermeasure against economic downturns or periods of stagnation.