What is the difference between expansionary and contractionary monetary policy quizlet?
Expansionary Monetary Policy (Quantitative Easing) involves an increase in the money supply in order to lower interest rates and increase Consumption and Investment. Contractionary Monetary Policy involves decreasing the money supply in order to increase interest rates and decrease Consumption and Investment.
Is there a difference between contractionary fiscal and monetary policy?
Monetary policy addresses interest rates and the supply of money in circulation, and it is generally managed by a central bank. Fiscal policy addresses taxation and government spending, and it is generally determined by government legislation.
Which kind of monetary policy would you expect in response to recession expansionary or contractionary?
Expansionary fiscal policy is most appropriate when an economy is in recession and producing below its potential GDP. Contractionary fiscal policy decreases the level of aggregate demand, either through cuts in government spending or increases in taxes.
What is the purpose of contractionary policy quizlet?
What is the goal of contractionary fiscal policy? To decrease real GDP and price level. This doesn’t mean that either of them will fall, they will just grow at a slower rate.
When would the government use expansionary and contractionary fiscal policy?
Contractionary fiscal policy is when the government taxes more than it spends. Expansionary fiscal policy is when the government spends more than it taxes.
What’s expansionary?
Expansionary, or loose policy is a form of macroeconomic policy that seeks to encourage economic growth. It is part of the general policy prescription of Keynesian economics, to be used during economic slowdowns and recessions in order to moderate the downside of economic cycles.
What does contractionary monetary policy mean?
Contractionary Policy as a Monetary Policy Contractionary monetary policy is driven by increases in the various base interest rates controlled by modern central banks or other means producing growth in the money supply. The goal is to reduce inflation by limiting the amount of active money circulating in the economy.