As hard as it is to believe there is a finite amount of cash floating around any economy, a large portion of the money in a financial system actually does not exist other than in a computer. When banks and other institutions stop …show more content…
By purchasing bonds, the central bank drives down market interest rates, making it cheaper for businesses and consumers to borrow. That 's because the purchases drive up bond prices, which move in the opposite direction of interest yields. So Qualitative Easing can make credit cheaper and more abundant. This is a good thing because credit is a key factor in economic growth. Businesses borrow to expand production. Consumers borrow to buy houses or large items such as cars.
Other tools used in todays economy, that differ from Quantitative Easing, include Open Market Operations, The Federal Open Market Committee, and Reserve Requirements. Open Market Operations is when the Federation chooses to buy or sell bonds. It is through open