What does the financial term quantitative easing mean?

Answer 1

"Quantitative easing" comes from the idea of reducing ("easing") pressure on banks by introducing a specified amount ("quantitative") of additional money into the reserves of member banks. It is sometimes referred to as "printing money", although since most transfers are done in the form of electronic records rather than cash, it is really more a matter of increasing or decreasing the amount of money a member bank has "on the books" in its reserve account at the central bank, in exchange for other financial instruments such as bonds or other securities.

Quantitative easing is typically used when other methods of controlling the money supply, such as adjusting the discount interest rate, fail (often because interest rates are already very low, and can't be adjusted downward much further). One risk of invoking quantitative easing includes introducing too much additional money into the reserves, thus spurring hyperinflation. On the other hand, if not enough additional money is introduced, the receiving banks may not use the money it received for any additional lending, thus failing to spur the economy.