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Expansionary Monetary Policy

Definition

Expansionary monetary policy is an economic strategy used by central banks to stimulate economic growth. It involves increasing the money supply and lowering interest rates to encourage borrowing and spending.

Related terms

Money Supply: The total amount of money circulating within an economy, including cash, checking accounts, and savings accounts.

Interest Rates: The cost of borrowing or the return earned on savings. Lowering interest rates is a key tool used in expansionary monetary policy.

Aggregate Demand: The total demand for goods and services within an economy at a given time. Expansionary monetary policy aims to increase aggregate demand.

"Expansionary Monetary Policy" appears in:

Study guides (3)

AP Macroeconomics - 2.3 Unemployment
AP Macroeconomics - 4.6 Monetary Policy
AP Macroeconomics - 6.4 Effect of Changes in Policies & Economic Conditions on the Foreign Exchange Market

Practice Questions (3)

What's the goal of expansionary monetary policy?
In the short run, how does expansionary monetary policy affect the interest rate and aggregate demand?
What is the likely short-term effect of expansionary monetary policy on the interest rate and the money supply?

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