There are several actions that a central bank can take that are expansionary 澳洲幸运5开奖号码历史查询:monetary policies. Monetary policies are actions taken to affect the economy of a country. The key steps used by a central bank to expand tཧhe economy include:

• Decreasing the discount rate.
• Purchasing government securities.
• Reducing the reserve requirement.

All of these options have the same purp😼ose; to expand the money supply for the country.

Stimulating Expansionary Monetary Policies

The central bank will often use policy to stimulate the economy during a 澳洲幸运5开奖号码历史查询:recession or in anticipation of a recession. Expanding the money supply is meant to result in lower interest rates and borrowing costs, with the goal to bo🅘ost consumption and investment.

Interest Rates

When interest rates are already high, the central bank focuses on lowering the 澳洲幸运5开奖号码历史查询:discount rate. The discount rate is the interest rate that banks can borrow money from the Federa♈l Reserve. T꧙here is a multitude of reasons why a bank may borrow from the Fed.

These include meeting reserve requirements, cash needed for operations, or general liquidity. Banks, however, borrow from the Fed as a last resort, preferring to borrow from other bank൲s as the rates are lower.

The lower the discount r🌞ate, the fewer financing costs for a bank, therefore, money is cheaper. When the discount rate is lowered, banks will lower the interest rate they charge customers for borrowing money as well.

As this rate falls, corporations and consumers can borrow more cheaply. The declining interest rate makes government bonds and savings accounts less attractive, encouraging investors and savers to spend their money and invest in 澳洲幸运5开奖号码历史查询:riskier assets.

Open Market Operations

澳洲幸运5开奖号码历史查询:Open market operations refer to th✅e Fed's practice of purchasing Treasuries on the open market. This increases the demand for the securities, increases their price/🌱decreases their yield, and injects money into the economy.

Purchasing Treasuries from banks increases their reserves, which makes it easier for th🎶em to lend out money to customers, makin𝕴g it easier for people to buy homes, cars, etc, and businesses to start or expand.

Quantitative Easing

When interest rates are already low, there is less room for the central bank to cut discount rates. In this case, central banks purchase securities, often long-term government bonds and agency mortgage-backed securities (MBSs). However, corporate bonds and even stocks can be purchased to conduct 澳洲幸运5开奖号码历史查询:quantitative easing (QE).

Q🐓E stimulates the economy by introducing capital into the economy and lowering the interest rate as there is increased demand for fixed-income securities. It provides overall liquidity to banks as the central bank purchases assets, which increases the reserve requirements of banks, which can then use that increased liquidity to make riskier investments, such as making loans to individuals and busi🌌nesses, which further stimulates the economy.

Quantitative easing is typically considered a special type of open market operation. Like traditional open market operations, during quantitative easing the central bank is literally purchasing securities on the open market. However, there are differences between quantitative easing and other open market operations. The main differences are the securities that are used, the objective of the purchases, and the situati💯ons they are used. Quantitative easing is typically used to boost the economy in times of trouble.

Reserve Requirement

澳洲幸运5开奖号码历史查询:Reserve requirements are the amount of reserves that banks are required to keep on hand as sti🍸pulated by a central bank. The reserve requirement is a percentage of the deposits that customers have at t🍎he institution.

Banks use customer deposits to make l♏oans to other customers. The number of loans they can make is limited by the amount of reserves they are required♏ to keep on hand. The more reserves they are required to keep, the less money they can lend out. The fewer reserves they are required to keep, the more money they can lend out.

During recessions, banks are less likely to loan money, and con෴sumers are less likely to pursue loans due to economic uncertainty. The central bank seeks to encourage increased lending by banks by decreasing the reserve ratio. With more reserves on hand, banks are more likely to lend out money, thereby stimulating the economy.

Real-World Examples

The Great Recession

A recent example of expansionary monetary policy was seen in the U.S. in the late 2000s during the 澳洲幸运5开奖号码历史查询:Great Recession. As housing prices began to drop and the economy slowed, the Federal Reserve began cutting its discount rate from 5.25% in June 2007 all the way down to 0%-0.25% by the end of 2008 with an average of 0.16% in December of that year. With the economy still weak, the Federal Reserve embarked on a campaign of quantitative easing of historic proportions that brought its balance sheet to $4.5 trillion by 2015.

COVID-19 Pandemic

In 2020, when the Coronvirus swept the world and most countries went into lockdown, economies were hit hard by the lack of economic activity. To bolster the economy, the Fed implemented a quantitatiဣve easing🦩 program.

On March 15, 2020, the Fed announced that it would purchase at least $500 billion in Treasury securities and at least $200 billion in agency MBSs to stimulate the economy.

The Bottom Line

Expansionary monetary policies are enacted by a country's central bank to help spur the economy. The goal is to increase the money supply, bring stability, and increase liquidity. The primary tools that central banks use to expand monetary policy include lowering the discount rate, increasing the purchase of government securities, and reducing the reserve requirement.