Answer: is when the central bank purchases investment maturity bonds in return for bank reserves and involves no change in the net financial assets of the non-government sector.
Explanation: Quantitative easing is when the central bank buys one type of financial asset (private holdings of bonds, company paper) in return for another asset (reserve balances at the central bank). The net financial assets in the private sector are in fact unchanged although the portfolio composition of those assets is altered (maturity substitution) which changes yields and returns. Quantitative easing increases central bank demand for "long maturity" assets held in the private sector which reduces interest rates at the longer end of the yield curve. These are traditionally thought of as the investment rates. This might increase aggregate demand given the cost of investment funds is likely to drop. But on the other hand, the lower rates reduce the interest-income of savers who will reduce consumption (demand) accordingly.
Answer: if the central bank desires to maintain a constant short-term target interest rate and net government spending is rising. (note comments)
Explanation: Please read Deficit spending 101 - Part 3 if you are still wondering why!
Answer: put downward pressure on short-term interest rates because they increase bank reserves in aggregate which then stimulate competition in the Interbank market.
Explanation: Please see Deficit spending 101 - Part 3 if you are still wondering why the correct answer is one.
Answer: undermine private wealth and are mirrored $-for-$ in non-government dis-saving.
Explanation: Please see Deficit spending 101 - Part 1 if you are still wondering why the correct answer is two. Further, when the government is building a sovereign fund by purchasing financial assets in the open markets it is spending. So it is a myth to say they "used" the surplus up to buy the assets.
Answer: are good during recessions because provide direct stimulus to the spending stream and finance private savings.
Explanation: Please see Deficit spending 101 - Part 1 if you are still wondering why the correct answer is three.