GENERAL KNOWLEDGE

Detailed explanation-1: -Expansionary Monetary Policy An expansionary policy lowers unemployment and stimulates business activities and consumer spending. The overall goal of the expansionary monetary policy is to fuel economic growth.

Detailed explanation-2: -Monetary policy affects aggregate demand and inflation through a variety of channels. Adverse shocks, such as an oil price increase, can lead to higher unemployment and higher inflation. Many governments have given responsibility for monetary policy-often described as inflation targeting-to central banks.

Detailed explanation-3: -Open Market Operations. The most commonly used tool of monetary policy in the U.S. is open market operations. Open market operations take place when the central bank sells or buys U.S. Treasury bonds in order to influence the quantity of bank reserves and the level of interest rates.

Detailed explanation-4: -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.