Expansionary Monetary Policy - Running head EXPANSIONARY MONETARY POLICY Expansionary Monetary Policy Name Karen Cromwell Institution Independence

Expansionary Monetary Policy - Running head EXPANSIONARY...

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Running head: EXPANSIONARY MONETARY POLICY 1 Expansionary Monetary Policy Name: Karen Cromwell Institution: Independence University
EXPANSIONARY MONETARY POLICY 2 Expansionary Monetary Policy Expansionary monetary policies are macroeconomic policies applied by a country’s central bank in an effort of accelerating economic growth through increasing money supply. The increase in money supply encourages bank lending by creating excess reserve funds and lowering the interest rates thus making borrowing favorable. Expansionary monetary policies are used to keep off the contractionary period of the business cycle and are mostly applied during times of recession. Through increasing money supply expansionary monetary policies lower unemployment rates and boosts borrowing from the private sector. Business can maintain client demands and also hire extra workers thereby increasing their income. It, in turn, increases consumer spending and induces economic growth. Banks with excess capital are in a better position to lend to banks

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