Reply for discussions | Economics homework help

Q.1  write response /reply for this discussion

Hello Everyone,

According to an article, I found online it was quoted that, “Expansionary policy expands the supply of money, whereas contractionary policy decreases the supply of a country’s currency” (Moffatt, 2018). These two concepts are opposite of each other but can have multiple affects on consumers. When the Federal Reserve chooses the expansionary policy they are wanting to decrease interest rates, but bond prices will increase. It can also cause our imported goods to decrease while the exported goods increase. As for contractionary policy, it will have the opposite effect of expansionary policy. Basically, interest rates will increase because bond prices decreased. Also, exported goods will decrease and imported goods will increase. There would have to be a balance between the two in order for them to work efficiently.

When it comes to employers, during the expansionary policy, unemployment rates are down because businesses are able to borrow money to support their businesses and employees. As for contractionary policy, it slows down the economic growth which increases unemployment rates due to high-interest rates. Once again, these two work in the opposite of each other where one could be more beneficial than the other.

Reference: 

Moffatt, M. (2018, December 23). Expansionary vs. Contractionary Monetary Policy. ThoughtCo. https://www.thoughtco.com/expansionary-vs-contractionary-monetary-policy-1146303

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