SIE (Securities Industry Essentials) Practice Exam

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What is defined as a central bank purchasing bonds and securities in the open market?

Open market operations
Quantitative easing
Capital injection
Fiscal stimulus

The correct answer is: Quantitative easing

Quantitative easing is the term used to describe when a central bank buys bonds and securities in the open market. This is a measure used to stimulate the economy by injecting more money into the financial system. Open market operations (A) refers to the buying and selling of government securities by a central bank, but does not necessarily involve an increase in the money supply. Capital injection (C) refers to providing additional funding to a business or organization, and is not exclusive to central banks. Fiscal stimulus (D) involves government spending or tax cuts to stimulate the economy, and is not directly related to central bank actions.