Which monetary policy tool is associated with quantitative easing?

Quantitative easing is a monetary policy tool utilized primarily by central banks to stimulate the economy when traditional monetary policy becomes ineffective, often due to interest rates being at or near zero. This approach involves large-scale asset purchases, which central banks implement to increase the money supply and encourage lending and investment.

By purchasing government securities and other financial assets, the central bank injects liquidity directly into the financial system. This increased availability of funds lowers interest rates, making borrowing cheaper for consumers and businesses. The goal is to enhance economic activity, stimulate inflation toward target levels, and combat deflationary pressures.

The other choices do not accurately describe quantitative easing. Raising interest rates is typically a contractionary policy used to cool down an overheating economy. Direct government spending is a fiscal policy measure rather than a monetary policy tool. Currency devaluation, while it can impact the economy, does not directly relate to the central bank's actions in terms of quantitative easing. Thus, large-scale asset purchases are the defining characteristic of this specific monetary policy technique.