ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What Is Monetary Policy? Monetary policy is a set of tools used by a nation’s central bank to control the overall money supply and promote economic growth and employ strategies such as revising interest rates and changing bank reserve requirements.

Detailed explanation-2: -Expansionary monetary policy: This type of monetary policy can increase the economy’s money supply through decreasing interest rates, lowering reserve requirements for banks, and the purchase of government securities by central banks.

Detailed explanation-3: -Conducting monetary policy If the Fed, for example, buys or borrows Treasury bills from commercial banks, the central bank will add cash to the accounts, called reserves, that banks are required keep with it. That expands the money supply.

Detailed explanation-4: -Expansionary policy is intended to boost business investment and consumer spending by injecting money into the economy either through direct government deficit spending or increased lending to businesses and consumers.

Detailed explanation-5: -Expansionary monetary policy stimulates the economy. The central bank uses its tools to add to the money supply. It often does this by lowering interest rates. It can also use expansionary open market operations, called quantitative easing.