Final answer:
When the Federal Reserve can't cut short-term nominal rates any further and its capacity to get long-term rates is limited, quantitative easing (QE) might be the only effective tool left to stabilize the economy.
Step-by-step explanation:
Quantitative easing involves the purchase of long-term government and private mortgage-backed securities by central banks.
This is done to make credit more available, thereby stimulating aggregate demand and supporting economic activity.
During the financial crisis of 2008-2009, as well as the economic challenges faced in 2020, quantitative easing was used as a nontraditional policy to provide additional financial support to the economy when reductions in interest rates were no longer feasible.
These policies include central-bank purchases of assets such as government bonds (see public debt) and other securities, direct lending programs, and programs designed to improve credit conditions. The goal of QE policies is to boost economic activity by providing liquidity to the financial system.