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: -Conducting monetary policy If the Fed, for example, buys or borrows Treasury bills from commercial banks, the central bank will add cash to the accounts, called reserves, that banks are required keep with it. That expands the money supply.

Detailed explanation-3: -Easy money can lead to high inflation. Discourages saving since interest rates on deposit accounts are low.

Detailed explanation-4: -In a tightening monetary policy environment, a reduction in the money supply is a factor that can significantly help to slow or keep the domestic currency from inflation. The Fed often looks at tightening monetary policy during times of strong economic growth.

Detailed explanation-5: -Easy monetary policy is a policy that a central bank introduces in which it lowers interest rates. If the central bank lowers interest rates, then borrowing becomes cheaper. They introduce easy monetary policy to boost economic activity. We also call it ‘easy money policy.