Expansionary Monetary and Fiscal Policies

Monetary and Fiscal Policies
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Introduction
Economic recession involves a substantial drop in economic activities for a defined period. This may be indicated by cases of unemployment rates, reduction of incomes and decline in both manufacturing and retail activities. When an economic recession occurs, people face hardships and end up leading a poor standard of living.
Expansionary monetary and fiscal policies
Expansionary measures include macroeconomic policies that a government may consider putting in place and which stimulate or positively affect the growth of the economy. Since the economy is in sluggishness, with the inflation rate going as low as 0.4% and the unemployment rate hitting 9%, the government should consider deploying a combination of both expansionary types of policies. These policies aid to raise the general level of aggregate demand in the economy. The other objective is to guard against these recessions and downturns.
One expansionary policy which is monetary will involve the lowering of interest rates. Reduction of interest rates tends to reduce the cost of obtaining funds from the financial institutions. This has an effect of enticing borrowers to secure more funds. The government may also achieve reduced interest rates through the open market purchase of their securities (Bianchi & Ilut, 2017). By purchasing of securities, money supply in circulation will go up and eventually reduce rates of interests. The positive side of this is rise in summative demand and also there will be increased investments due to business optimism in the sale of their products in the market. The general positive effect in lowered interest is therefore the economic upward trend of the national income.
An example where lowered interest rates boosted the economic growth is evidenced in the year 2008 financial crisis that called for all central banks in the world to reduce interest rates to nearl...