Economics Monetary Policy Questions
Expansionary monetary policy refers to the actions taken by a central bank to stimulate economic growth and increase aggregate demand. This policy involves increasing the money supply, lowering interest rates, and implementing measures to encourage borrowing and spending. The goal of expansionary monetary policy is to boost economic activity, promote investment, and reduce unemployment.
On the other hand, contractionary monetary policy refers to the actions taken by a central bank to slow down economic growth and reduce inflationary pressures. This policy involves decreasing the money supply, raising interest rates, and implementing measures to discourage borrowing and spending. The objective of contractionary monetary policy is to control inflation, stabilize prices, and prevent the economy from overheating.
In summary, expansionary monetary policy aims to stimulate economic growth and increase aggregate demand, while contractionary monetary policy aims to slow down economic growth and reduce inflationary pressures.