Expansionary policy is intended to boost business investment and consumer spending by injecting money into the economy either through direct government deficit spending or increased lending to businesses and consumers.

What is the purpose of expansionary monetary policy?

Expansionary policy is intended to boost business investment and consumer spending by injecting money into the economy either through direct government deficit spending or increased lending to businesses and consumers.

Why expansionary monetary policy may not work?

Why expansionary monetary policy may not work

If confidence is very low, then people may not want to invest or spend, despite lower interest rates. In a credit crunch, banks may not have funds to lend, therefore although the Central Bank cuts base rates, it is still difficult to get a loan from a bank.