Question

Which monetary policy tool is considered an expansionary tool?

Answer 1

The monetary policy of reducing borrowing rates is an Expansionary Tool.

An Expansionary Policy is one where money supply in the market is increased and economic activity such as spending, is given a boost. This is achieved by the government using various monetary tools, one of which is reducing the borrowing rate. When interest rates are low, it encourages borrowing by individuals and companies.

Answer 2

This policy is taken  place and applied at the time of the central bank make use of its own tools to stimulate the economy and also increase the money supply to the higher level and lower lever interest rate and well developed aggregate demand in the market.

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