Final answer:
To stimulate the economy in the short run, expansionary monetary policy is typically used, which increases the money supply and lowers interest rates to encourage borrowing and spending. Contractionary policy, aimed at controlling inflation, does the reverse and can slow economic activity. Quantitative easing is an example of an expansionary policy used in times of recession.
"The correct option is approximately option C"
Step-by-step explanation:
Monetary Policy and Economic Stimulation
When discussing the impact of monetary policy on the economy, particularly in reference to short-term economic stimulation, one of the most critical concepts is expansionary monetary policy. This type of policy involves the central bank taking actions to increase the money supply and reduce interest rates, which in turn hopes to boost aggregate demand. An expansionary monetary policy is adopted to combat recessionary pressures by encouraging more borrowing and spending within the economy.
Conversely, contractionary monetary policy, also known as tight monetary policy, has the opposite effect. This policy aims to reduce inflationary pressures by reducing the money supply and increasing interest rates, which can discourage borrowing and spending, potentially leading to a short-term slowdown in economic growth. Therefore, if central bankers around the world were consulted, they would attest to expansionary monetary policy being the approach that tends to stimulate the economy in the short-run.
During the 2008-2009 recession, a notable method of expansionary policy was quantitative easing, which involved central banks purchasing long-term securities in order to increase the money supply and encourage lending. This unconventional monetary policy tool has been a cornerstone for central banks looking to stimulate the economy amidst traditional policy constraints.