Expansionary and Contractionary Monetary Policy
Not what you're looking for?
Explain the difference between expansionary monetary policy and contractionary monetary policy. Give a detailed explanation including examples. Give work cited if needed. Please post an original response.
Purchase this Solution
Solution Summary
The solution is very easy to understand and concise. It is an excellent response for students who want to understand the concepts and then use the same concepts to solve similar problems in the future. Overall, an excellent response. The solution provides the necessary steps which are easy to follow.
Solution Preview
Expansionary and contractionary monetary policies are different. In an expansionary monetary policy, the Fed keeps the interest rates low in order to boost consumer spending and grow the economy. This is what is happening right now. There is little fear of inflation and so the Fed is keeping interest rates close to 0% so that the economy can grow rapidly.
In contrast a contractionary monetary policy is when the Fed tightens up and raises the interest rate because it fears that inflation is going to increase. If there is fear of inflation then the Fed raises the interest rates to curb spending and stop the economic growth.
------------------------
Update:
Expansionary Monetary Policy
In the United States, when the Federal Open Market Committee wishes to increase the money supply, it can do a combination of three things:
1. Purchase securities on the open market, known as Open Market Operations
2. Lower the Federal Discount Rate
3. Lower Reserve Requirements
These all directly ...
Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.