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Discuss expansionary and contractionary monetary policies.

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. Answer needs to sound from a Business College student.

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There are two primary macroeconomic policies that affect aggregate demand. Fiscal policy (government expenditure and taxation) and monetary policy (affecting interest rates). A tax cut (such as Bush's fiscal stimulus package) for example, is a way to create more disposable income for consumers. This should ultimately increase their spending leading to more consumption and higher GDP, lower unemployment, and a general expansion of the economy. Monetary policy is conducted ...

Solution Summary

The following provides a discussion of monetary policy, how it is used, implemented, and modeled. Examples are provided in the context of the AD/AS model. This solution is 300 words and includes a diagram in the attachment.