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Quantitative Easing
How to Explain X to aChild
Monetary Policy
U.S. FederalReserve
Inflation (economics)
Layman's Terms
Macroeconomics
Finance
Economics
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Last asked: 11 Nov,
2014
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How do you explain quantitative easing inlayman's terms?
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Jagadeesh TJEdit Biography Make Anonymous
Originally Answered: What is quantitative easing in layman's terms?
QE is an injection of cash into banking system to stimulate lending.
Important note:
The goal of this answer is to give basic understanding of Quantitative
Easing to non-professionals. I simplified many concepts and omitted
important details, for the ease of comprehension;
Whether QE was the right thing to do is a separate topic - my goal is to
explain, not to judge.
Part 1: Some background on money and fractional reserve banking.
Every economy needs money to function properly. The total amount of money
in the economy (Money supply ) is regulated by the Central banks -
special institutions designated by the Governments for this task. In the US,
such bank is called Federal Reserve , "Fed".
Money Supply consists of 2 components (oversimplified):
Upvoted by Ayu Nazrah, works at Investment Bank year 2005 - 2012 Michael
Lee, Public Policy Analyst Peggy Li, Economics Major at Duke
Andrei has 30+ answers in Finance.
Andrei Kolodovski, Managing Partner, TRIZ Fund
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