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📖Economic Survey 2025 Terms Micro Series 📚Term #2 : Carbon Border Adjustment Mechanism (CBAM) ☑️The Carbon Border Adjustment Mechanism (CBAM) is a carbon-pricing tool introduced by the European Union to prevent carbon leakage — where companies shift production…
📖Economic Survey 2025 Terms Micro series
📚 Term #3 : QE Infinity Trap
☑️QE (Quantitative Easing) is an unconventional monetary policy where a central bank purchases government bonds and other securities to inject liquidity into the economy, typically used during recessions or crises.
☑️The idea of a “QE Infinity Trap” refers to a situation where an economy becomes so dependent on continuous liquidity support that withdrawing QE becomes extremely difficult without causing instability.
👉How the Trap Works
1. Initial QE Phase
During crises (e.g., post-2008 global financial crisis or COVID period), central banks like the Federal Reserve inject massive liquidity to boost demand and prevent collapse.
2. Asset Price Inflation
Excess liquidity raises stock, bond, and real estate prices.
3. Market Dependency
Financial markets and governments begin to rely on cheap money.
4. Withdrawal Problem
When central banks attempt to reduce QE (tapering), markets react sharply (e.g., volatility, capital outflows).
5. Cycle Repeats
Due to instability fears, central banks resume easing — creating a loop → hence “QE Infinity.”
☑️Why It Matters for India :-
•Capital flow volatility impacts emerging markets.
•Currency depreciation risk.
•Imported inflation pressures.
•External vulnerability for developing economies.
#UPSC #EconomicSurvey
📚 Term #3 : QE Infinity Trap
☑️QE (Quantitative Easing) is an unconventional monetary policy where a central bank purchases government bonds and other securities to inject liquidity into the economy, typically used during recessions or crises.
☑️The idea of a “QE Infinity Trap” refers to a situation where an economy becomes so dependent on continuous liquidity support that withdrawing QE becomes extremely difficult without causing instability.
👉How the Trap Works
1. Initial QE Phase
During crises (e.g., post-2008 global financial crisis or COVID period), central banks like the Federal Reserve inject massive liquidity to boost demand and prevent collapse.
2. Asset Price Inflation
Excess liquidity raises stock, bond, and real estate prices.
3. Market Dependency
Financial markets and governments begin to rely on cheap money.
4. Withdrawal Problem
When central banks attempt to reduce QE (tapering), markets react sharply (e.g., volatility, capital outflows).
5. Cycle Repeats
Due to instability fears, central banks resume easing — creating a loop → hence “QE Infinity.”
☑️Why It Matters for India :-
•Capital flow volatility impacts emerging markets.
•Currency depreciation risk.
•Imported inflation pressures.
•External vulnerability for developing economies.
#UPSC #EconomicSurvey
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CSR's IAS - Official UPSC/PSC Preparation Channel
📖Economic Survey 2025 Terms Micro series 📚 Term #3 : QE Infinity Trap ☑️QE (Quantitative Easing) is an unconventional monetary policy where a central bank purchases government bonds and other securities to inject liquidity into the economy, typically used…
📖 Economic Survey 2025 Terms Micro Series
📚 Term #4 : Virtuous Cycle of Investment
👉A virtuous cycle of investment refers to a self-reinforcing loop where one positive economic action triggers another, leading to sustained growth and development.
👉Basic Flow
Higher Investment
→ Higher Production
→ Higher Income
→ Higher Savings
→ More Funds for Investment
→ Again Higher Investment
This continuous loop strengthens economic growth over time.
👉How It Works (Indian Context)
For example:
☑️Government increases capital expenditure (roads, railways, digital infra).
•This boosts private sector confidence.
•Private firms invest more.
•Employment rises.
•Consumption increases.
•Corporate profits improve.
•Further reinvestment happens.
Thus, growth feeds on itself.
👉Link to Economic Theory
•Related to the Multiplier Effect (Keynesian economics).
•Supported by capital formation theory.
•Opposite of a vicious cycle (low income → low savings → low investment → stagnation).
#UPSC #EconomicSurvey
📚 Term #4 : Virtuous Cycle of Investment
👉A virtuous cycle of investment refers to a self-reinforcing loop where one positive economic action triggers another, leading to sustained growth and development.
👉Basic Flow
Higher Investment
→ Higher Production
→ Higher Income
→ Higher Savings
→ More Funds for Investment
→ Again Higher Investment
This continuous loop strengthens economic growth over time.
👉How It Works (Indian Context)
For example:
☑️Government increases capital expenditure (roads, railways, digital infra).
•This boosts private sector confidence.
•Private firms invest more.
•Employment rises.
•Consumption increases.
•Corporate profits improve.
•Further reinvestment happens.
Thus, growth feeds on itself.
👉Link to Economic Theory
•Related to the Multiplier Effect (Keynesian economics).
•Supported by capital formation theory.
•Opposite of a vicious cycle (low income → low savings → low investment → stagnation).
#UPSC #EconomicSurvey