quantitative easing
A monetary policy tool where a central bank purchases government bonds and other financial assets to inject money into the economy.
Example
“The Federal Reserve used quantitative easing after the 2008 financial crisis to prevent a depression.”
Memory Tip
QE = the Fed EASES economic pressure by creating a QUANTITY of new money.
Why It Matters
Quantitative easing affects inflation rates, interest rates on savings accounts, and investment returns, which directly impact your purchasing power and the value of your savings. Understanding this policy helps you make better decisions about where to keep your money and how to protect your wealth during economic downturns.
Common Misconception
Many people think quantitative easing directly puts money into the pockets of everyday citizens, but it actually works by increasing the money supply through bank and financial system channels. The benefits often take time to reach regular people and may primarily benefit asset owners like stock and real estate investors.
In Practice
During the 2008 financial crisis, the Federal Reserve purchased over 1.7 trillion dollars in government bonds and mortgage-backed securities to stabilize the economy. This kept interest rates near zero, made borrowing cheaper for businesses and homeowners, and helped prevent a complete financial collapse, though it also contributed to lower returns on savings accounts and CDs.
Etymology
Quantitative (measured in quantities) + easing (making easier) — increasing the quantity of money to ease financial conditions.
Common Misspellings
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