Expansionary monetary policies aim to encourage banks to loan money and for consumers to make major purchases.Expansionary monetary policy is a tool central banks use to stimulate a declining economy and GDP.
To increase the money supply — that is, the amount of cash and easily obtainable funds circulating throughout the country — the Federal Reserve reduces short-term interest rates. It can do so in two ways: reducing theis the interest rate banks charge each other for extremely short-term loans. The Fed requires that banks keep a certain percentage of their deposits on hand every night to maintain a certain level of solvency.
Inflation occurs naturally in an economy, and the US targets an annual inflation rate of 2%. Once inflation starts to go above 2%, meaning costs for goods and services are increasing faster than the desired rate, the government and central bank put on the brakes. The Fed continued to drop the rate for a year, up until December 2008 when the fed funds rate hit 0%. But, because the recession was so severe, the decrease in the fed funds rate and the discount rate to zero was not enough to combat it.
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Simulate? Or Stimulate?
'The FED is diluting your hard earned savings'.. They print dollars to pump in to junk stocks and bonds, how is this helping the hard-working people?😣
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