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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