ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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. It lowers the value of the currency, thereby decreasing the exchange rate.

Detailed explanation-2: -Expansionary Monetary Policy Graph Lower interest rates decrease the cost of borrowing money, which encourages consumers to increase spending on goods and services and businesses to invest in new equipment.

Detailed explanation-3: -Tools for an Expansionary Monetary Policy 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.

Detailed explanation-4: -Expansionary monetary policy works by expanding the money supply faster than usual or lowering short-term interest rates. It is enacted by central banks and comes about through open market operations, reserve requirements, and setting interest rates.