The central bank of an inflation-targeting economy decides to implement a large-scale programme of Quantitative Easing (QE) by purchasing long-term government bonds from commercial financial institutions. Which of the following combinations of macroeconomic outcomes is most likely to result from this policy?
A fall in sovereign bond yields and a depreciation of the domestic exchange rate
A rise in corporate bond yields and an appreciation of the domestic exchange rate
A fall in equity prices and an increase in commercial bank lending rates
A rise in sovereign bond yields and a decrease in commercial bank credit
