ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -This is a monetary policy that aims to increase the money supply in the economy by decreasing interest rates, purchasing government securities by central banks, and lowering the reserve requirements for banks.

Detailed explanation-2: -If inflation is too high, tightening monetary policy (which raises interest rates in the economy) will help to bring inflation back towards the target, but will also be likely to reduce economic growth and put upward pressure on unemployment, all else being equal.

Detailed explanation-3: -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-4: -A contractionary policy increases interest rates and limits the outstanding money supply to slow growth and decrease inflation, where the prices of goods and services in an economy rise and reduce the purchasing power of money.

Detailed explanation-5: -Monetary policy is thought to increase aggregate demand through expansionary tools. These include lowering interest rates and engaging in open market operations (OMO) to purchase securities. These have the effect of making it easier and cheaper to borrow money, with the hope of incentivizing spending and investment.