ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -These policies are intended to increase demand and aggregate spending. The goal of expansionary policy is to boost the economy during periods of slow growth or recession, though it may unintentionally increase the rate of annual inflation. Federal Reserve Bank of New York.

Detailed explanation-2: -The purpose of expansionary fiscal policy is to boost growth to a healthy economic level, which is needed during the contractionary phase of the business cycle. The government wants to reduce unemployment, increase consumer demand, and avoid a recession.

Detailed explanation-3: -The Federal Reserve’s expansionary monetary policy often takes a three-pronged approach: Lowering interest rates. Reducing the reserve requirement (the amount of cash banks must keep on hand) Buying back government securities.

Detailed explanation-4: -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.