ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -By decreasing the short-term interest rates, the central bank reduces the cost of borrowing to commercial banks. Subsequently, the banks lower the interest rates they charge their consumers for loans. Therefore, whenever the central bank lowers interest rates, the money supply in the economy increases.

Detailed explanation-2: -Easy money, in academic terms, denotes a condition in the money supply and monetary policy where the U.S. Federal Reserve (Fed) allows cash to build up within the banking system. This lowers interest rates and makes it easier for banks and lenders to loan money to the population.

Detailed explanation-3: -Expansionary or easy money policy: The Fed takes steps to increase excess reserves, banks can make more loans increasing the money supply, which lowers the interest rate and increases investment which, in turn, increases GDP by a multiple amount of the change in investment.

Detailed explanation-4: -If the Federal Reserve adopts an expansionary monetary policy which of the following would happen? interest rates fall and credit is abundant. How does a monetary policy of low interest rates affect consumers? it lowers saving rates.

Detailed explanation-5: -Expansionary monetary policy is when a central bank uses its tools to stimulate the economy. That increases the money supply, lowers interest rates, and increases demand. It boosts economic growth.