Canadian Securities Course (CSC) Practice Exam 2025 – The Comprehensive All-in-One Guide to Exam Success!

Quantitative easing is a monetary policy that central banks utilize to influence the economy when traditional monetary policy measures, like lowering interest rates, become less effective, especially when those rates are already near zero. By purchasing financial assets, such as government bonds, the central bank injects liquidity directly into the economy, which increases the money supply.

This increased money supply typically leads to lower interest rates, making borrowing cheaper for consumers and businesses. As borrowing becomes more accessible, it encourages spending and investment, which can help stimulate economic activity, especially in times of recession or economic stagnation.

The other options relate to fiscal policies or actions that do not align with the nature of quantitative easing. For instance, increasing taxes for economic growth or reducing government spending does not reflect the essence of liquidity provision through monetary policy. Likewise, focusing on the currency exchange value doesn't capture the primary objectives of quantitative easing, which is aimed at bolstering the economy through increased money supply and reduced interest rates.