Answer to Question #52008 in Macroeconomics for Emilia Shindinge
central Banks occasionally employ expansionary monetary policy to realize certain economic objectives. Write detailed notes on the position of the Bank of Namibia with regard to the independence of its monetary policy.
Expansionary monetary policy is when a central bank, such as the Federal Reserve, uses its tools to stimulate the economy. The effect is an increase in the money supply, lower interest rates, and a rise in overall aggregate demand. This will boost growth as measured by Gross Domestic Product (GDP). It usually lowers the value of the currency, thereby decreasing the exchange rate. It is the opposite of contractionary monetary policy. Expansionary monetary policy is used to ward off the contractionary phase of the business cycle. However, it is difficult for policymakers to always catch this in time. Therefore, you will most often see expansionary policy used after a recession has already started.