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: -An expansionary monetary policy decreases unemployment as a higher money supply and attractive interest rates stimulate business activities and expansion of the job market.

Detailed explanation-3: -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-4: -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-5: -The goal of expansionary monetary policy is to grow the economy, particularly in times of economic trouble. The overall aim is to increase consumer and business spending by increasing the money supply through a variety of measures that improve liquidity.