In economics, expansionary policies are fiscal policies
, like higher spending and tax cuts, that encourage economic growth. In turn, an expansionary monetary policy is monetary policy
that seeks to increase
the size of the money supply
. In most nations, monetary policy is controlled by either a central bank
or a finance ministry
and Keynesian economics
significantly differ on the effects and effectiveness of monetary policy on influencing the real economy; there is no clear consensus on
how monetary policy affects real economic variables (aggregate output or income,
employment). Both economic schools accept that monetary policy affects monetary
variables (price levels, interest rates).
Monetary policy relies on a number of tools: monetary base
, reserve requirements
, discount window lending
and interest rate
expansion of the monetary supply can be achieved indirectly by decreasing the nominal interest rates.