Expansionary Economic Policy
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Introduction:
In order to get the economy out of recession, federal government would engage in expansionary economic policies including expansionary fiscal policy and expansionary monitory policy. Under each of expansionary economic policies require different actions taken by the government. The subject study is aimed to conceptualize the concept of expansionary fiscal and monitory policies and to identify different actions and activities that a federal government may take under expansionary fiscal and monitory policies in order to take an economy out of recession (Larch, and Martins, 2009). Additionally order to identify and explain different actions the federal government would take engaging in expansionary fiscal policy have been discussed in term of necessary changes in taxes and governmental spending and the effect on demand, employment and overall GDP. On the other hand in order to discuss the expansionary monetary policy three tools available to Federal Reserve Bank while conducting monetary policy and explaining increase or decrease the required reserve ratio, increase or decrease the discount rate and sell or buy the government securities when conducting expansionary monetary policy.
Expansionary Monetary Policy:
The expansionary monetary policy refers to the policy of central bank for instance the Federal Reserve employed its tools in order to stimulate the economy. Under this policy the Federal Banks usually lower their Fed Fund Rate in order increase the money supply in the market. Due this action the liquidity is increased;compel the banks to lend more money. Due to this the interest rates and mortgage decline. On the other hand due to cheaper credit available in the market the consumers can borrow and spend more and therefore cause the businesses to expand to meet the increased demand. Finally