Actions taken by a country's central bank to expand the money supply and lower interest rates with the objective of increasing real gdp and reducing unemployment is

Question

Business

Sarahi Frost

14 March, 09:41

Actions taken by a country's central bank to expand the money supply and lower interest rates with the objective of increasing real gdp and reducing unemployment is

+1

Answers (1)

Know the Answer?

Karen Wade · Answer 1

Expansionary monetary policies

Explanation:

The central bank of any country has various monetary tools which usually entail adjusting the policy rate of interest and the money supply to achieve an aim.

If the central bank wishes to spur growth and employment, it implements a range of policies known as expansionary monetary policies (the name is derived from the aim of the policy, to expand the rate of growth and increase economic activity). This usually include lowering the policy rate of interest in a bid to increase lending, and increasing money supply in the economy.

On the other hand, if the aim was to tame inflation in a fast growing environment, the central bank will implement restrictive monetary policies by increasing the policy rate of interest and reducing money supply.