ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A central bank, such as the Federal Reserve in the U.S., will use expansionary monetary policy to strengthen an economy.

Detailed explanation-2: -The greater the reserve requirement, the less money that a bank can potentially lend-but this excess cash also staves off a banking failure and shores up its balance sheet. Still, when the reserve ratio increases, it is considered contractionary monetary policy, and when it decreases, expansionary.

Detailed explanation-3: -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-4: -A contractionary policy is a tool used to reduce government spending or the rate of monetary expansion by a central bank to combat rising inflation. The main contractionary policies employed by the United States include raising interest rates, increasing bank reserve requirements, and selling government securities.