A. Large-scale purchase of assets by the central bank to inject liquidity
B. Increase in policy interest rates
C. Increase in CRR
D. Reduction in government expenditure
Answer: Option A
Solution (By JKSSB Mock Tests)
Quantitative easing is an unconventional monetary policy tool whereby a central bank purchases large quantities of financial assets to inject liquidity into the economy when interest rates are already near zero.
Explanation:
Externalities cause a divergence between private and social costs (or benefits), leading to over- or under-production relative to the socially optimal level.
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