What is the primary goal of expansionary monetary policy?

The primary goal of expansionary monetary policy is to boost economic activity and consumer spending. This is achieved by increasing the money supply and reducing interest rates, which encourages borrowing and investment. When central banks implement expansionary monetary policy, such as lowering the federal funds rate or purchasing government securities, they aim to make money more accessible and cheaper to borrow. As a result, businesses are more inclined to invest in expansion and hiring, and consumers are more likely to spend on goods and services.

The increase in consumer spending and investments can lead to a multiplier effect, further stimulating economic growth. This approach is particularly employed during periods of economic downturn or recession, where the goal is to revive demand in the economy and alleviate the negative impacts of reduced consumer and business confidence.