Question

What is the term for Fed policies that expand the money supply and lower interest rates?

1) Easy monetary policy
2) Tight monetary policy
3) Fiscal policy
4) Monetary policy

Answer 1

An expansionary monetary policy or loose monetary policy is implemented by the Fed to expand the money supply and lower interest rates.

Step-by-step explanation:

An expansionary monetary policy or loose monetary policy is the term used to describe Fed policies that expand the money supply and lower interest rates. This policy is implemented when the central bank wants to stimulate borrowing and economic growth. It involves actions like decreasing interest rates, buying government securities, and implementing quantitative easing.

For example, during the 2008-2009 recession, the Federal Reserve used expansionary monetary policy, including quantitative easing, to expand the supply of credit and stimulate economic activity.