The RBI adopts various Monetary Policies at different times. If you read in Newspaper that RBI has adopted expansionary policy, what would you conclude by this?
Codes :
The RBI adopts various Monetary Policies at different times. If you read in Newspaper that RBI has adopted expansionary policy, what would you conclude by this?
Codes :
The correct option is B 2, 3 and 4 only
The first option is not correct because in expansionary policy RBI try to increase money supply in the market. In first option it is about decreasing the money supply in the market.
Expansionary monetary policy aims to increase aggregate demand and economic growth in the economy.
Expansionary monetary policy involves cutting interest rates or increasing the money supply to boost economic activity. It could also be termed a ‘loosening of monetary policy’. It is the opposite of ‘tight’ monetary policy.
If the economy is forecast to enter into recession, they are likely to cut interest rates and try to boost economic growth. And in some cases, they may pursue expansionary monetary policy, even if inflation is above target – if they think inflation is temporary and there is greater risk of recession.
Effect of Expansionary Monetary Policy
In theory, expansionary monetary policy should cause higher economic growth and lower unemployment. It will also cause a higher rate of inflation. To some extent, the expansionary monetary policy of 2008, helped economic recovery. But, the recovery was weaker than expected showing limitations of monetary policy.
2, 3 and 4 only
The first option is not correct because in expansionary policy RBI try to increase money supply in the market. In first option it is about decreasing the money supply in the market.
Expansionary monetary policy aims to increase aggregate demand and economic growth in the economy.
Expansionary monetary policy involves cutting interest rates or increasing the money supply to boost economic activity. It could also be termed a ‘loosening of monetary policy’. It is the opposite of ‘tight’ monetary policy.
If the economy is forecast to enter into recession, they are likely to cut interest rates and try to boost economic growth. And in some cases, they may pursue expansionary monetary policy, even if inflation is above target – if they think inflation is temporary and there is greater risk of recession.
Effect of Expansionary Monetary Policy
In theory, expansionary monetary policy should cause higher economic growth and lower unemployment. It will also cause a higher rate of inflation. To some extent, the expansionary monetary policy of 2008, helped economic recovery. But, the recovery was weaker than expected showing limitations of monetary policy.
