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. An expansionary policy lowers unemployment and stimulates business activities and consumer spending.

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: -Monetary policy involves the management of the money supply and interest rates by central banks. To stimulate a faltering economy, the central bank will cut interest rates, making it less expensive to borrow while increasing the money supply.

Detailed explanation-4: -Monetary Policy’s Impact on Interest Rates It is true that expansionary monetary policies (or “easy money”) usually lead to a temporary decrease in the level of interest rates.

Detailed explanation-5: -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.