Q. With reference to the term Quantitative Easing (QE), Which of the following statements is/are incorrect?
Select the correct answer using the codes given below:
Q. With reference to the term Quantitative Easing (QE), Which of the following statements is/are incorrect?
Select the correct answer using the codes given below:
The correct option is A 1 only
Explanation:
Statement 1 is incorrect: QE generally involves a nation’s central bank purchasing longer-term government bonds, as well as other types of assets, such as mortgage-backed securities (MBS), to quickly increase the domestic money supply and spur economic activity.
Statement 2 is correct: In the worst possible scenario, this strategy may cause inflation without the intended economic growth. An economic situation where there is inflation, but no economic growth, is called stagflation.
Statement 3 is correct: In April 2021, without saying so, the Reserve Bank of India (RBI) embarked on quantitative easing (QE) with a new name: Government Securities Acquisition Programme (GSAP). RBI said that the GSAP promise is to buy ₹1 trillion worth of government securities in the secondary market in the first quarter of this fiscal year.
Explanation:
Statement 1 is incorrect: QE generally involves a nation’s central bank purchasing longer-term government bonds, as well as other types of assets, such as mortgage-backed securities (MBS), to quickly increase the domestic money supply and spur economic activity.
Statement 2 is correct: In the worst possible scenario, this strategy may cause inflation without the intended economic growth. An economic situation where there is inflation, but no economic growth, is called stagflation.
Statement 3 is correct: In April 2021, without saying so, the Reserve Bank of India (RBI) embarked on quantitative easing (QE) with a new name: Government Securities Acquisition Programme (GSAP). RBI said that the GSAP promise is to buy ₹1 trillion worth of government securities in the secondary market in the first quarter of this fiscal year.
