Question

• Interest rates are at historic lows in many countries—in some cases, close to zero. How is expansionary monetary policy, or more specifically an open market purchase, supposed to work? How do near-zero interest rates limit the ability of expansionary monetary policy to work?
• In your opinion, how effective has the Australian Government’s policy been as a response to the economic downturn due to the Covid-19 situation? What evidence can you suggest to support your position?

Answer 1

Expansionary monetary policy is while a central bank users it's equipments to invigorating the economy . That enlarges the money supply , lowers interset rates and enlarges demand . It grows economic growth . It lowers the value of currency , thereby decreasing the exchange rate . Expansionary monetary policy discourages the downturn phase of the business cycle . But it is hard for policy market to catch this in time . As a result , Expansionary policy used after a recession has commenced.

Expansionary monetary policy toils by expanding the money contribute speedy than usual . It is ratified by central banks and approaches about through open market operators , reserve requirements , and setting interest rates . Monetary policies are activities taken to act on the economy of a country .

The central bank , such as the Federal Reserve in the US(United states) , will use expansionary monetary to build up an economy . Due to COVID-19 the Federal Government has announced economic measures totalling up to $189 billion in cash and credit . Approximately 9.7% of Australinan GDP(Gross Domestic Product) is being provided to Australinan through this crisis .

Several crucial policies are taken in Australia . Like only Australinan citizens , residents and immediate family extremities can move to Australia . Everyone going in for Australia must self isolate for 14 days .

Zero bounded interest rate presuppositions have been upended in the recent years . In the monetary policy , reference to a zero bound on the interest rates demeanours that the central bank can no longer lessen the interest rate to stimulate the economic growth .