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.
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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