Expansionary monetary policy is an economic strategy used by central banks to stimulate economic growth. It involves increasing the money supply and lowering interest rates to encourage borrowing and spending.
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Money Supply: The total amount of money circulating within an economy, including cash, checking accounts, and savings accounts.
Interest Rates: The cost of borrowing or the return earned on savings. Lowering interest rates is a key tool used in expansionary monetary policy.
Aggregate Demand: The total demand for goods and services within an economy at a given time. Expansionary monetary policy aims to increase aggregate demand.