Answer to Question #58444 in Macroeconomics for Justin

Question

If the Central Bank keeps nominal interest rates close to zero, and uses Quantitive Easing, how may output fail to expand?

Answer 1

If the Central Bank keeps nominal interest rates close to zero and implements quantitative easing by buying financial assets from commercial banks and other financial institutions to increase the money supply, then the inflation may be higher, then the total increase in business activity, which may cause output not to expand.