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: -The Federal Reserve has three expansionary monetary policy methods: lowering interest rates, decreasing banks’ reserve requirements, and buying government securities. Expansionary monetary policy’s aim is to make it easier for individuals and companies to borrow and spend money-actions that all stimulate the economy.

Detailed explanation-3: -Monetary policy influences economic activity by changing the incentives for saving and investment. This channel typically affects consumption, housing investment and business investment. Lower interest rates on bank deposits reduce the incentives households have to save their money.