ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A central bank may deploy an expansionist monetary policy to reduce unemployment and boost growth during hard economic times. It usually does so by lowering the interest rates and increasing the money supply to boost more employment opportunities.

Detailed explanation-2: -Stimulating Expansionary Monetary Policies. The central bank will often use policy to stimulate the economy during a recession or in anticipation of a recession. Expanding the money supply is meant to result in lower interest rates and borrowing costs, with the goal to boost consumption and investment.

Detailed explanation-3: -During a recession, loose monetary policy can help the economy recover by sparking aggregate demand because individuals and firms are able to borrow more to spend and invest.

Detailed explanation-4: -Interest rates usually fall in a recession as loan demand declines and investors seek safety. A central bank can lower short-term interest rates and buy assets during a downturn. Those actions affect the economy directly and signal the central bank’s intent to keep monetary policy accommodative for longer.

Detailed explanation-5: -Expansionary Monetary Policy The U.S. Federal Reserve employs expansionary policies whenever it lowers the benchmark federal funds rate or discount rate, decreases required reserves for banks or buys Treasury bonds on the open market. Quantitative Easing, or QE, is another form of expansionary monetary policy.