The bank creates new money and injects it into the economy to try to boost spending.
BBC: Economy tracker: Interest rates
The new money the Fed injects into the economy gets spent by private parties, not by the government.
FORBES: Quantitative Easing Is A Bottom-Up Policy
In a normally functioning economy, when the central bank buys government bonds, it injects money into the banking system where it will be lent out, facilitating growth.
WSJ: Review & Outlook: Japan's Bank of Bernanke
And by loaning more money to banks, it injects money into the financial system, and the price of loans is the interest rate.
NPR: Will Fed Rate Cut Help Stem a Recession?
Under QE, the Bank injects new money into the financial system to try to boost banks' lending, and in turn the wider economy.
BBC: Business group lists 15 ideas 'to boost the UK economy'
Through this the Bank injects new money into the economy with the aim of trying to lower borrowing costs, boosting spending and stimulating growth.
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