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Sagot :
The above case represents the case of Expansionary monetary policy.
Explain in detail.
- Short-term interest rates are lowered or the money supply is increased more quickly than usual as a result of expansionary monetary policy. It is implemented by central banks and accomplished through interest rate setting, reserve requirements, and open market activities.
- Expansionary monetary policy is a technique used by central banks to boost a flagging GDP and economy.
- Reduced reserve requirements for banks, increased purchases of government assets, and lower interest rates are the three tools the Federal Reserve uses to conduct an expansionary monetary policy.
- Inflation rates rise as more money is injected into the economy. It may benefit or hurt the economy, depending on the situation.
- The excessive expansion of the money supply could lead to levels of inflation that are unsustainable.
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