Monetary Policies And Monetary Policy Essay

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Monetary policies
Monetary policies are strategies used by the central bank, financial regulatory committee of currency board to regulate the amount of money supply in the economy. There are two types of monetary policies. These are expansionary monetary policies and contractionary monetary policies.
Expansionary monetary policies entails increasing money supply in the economy. Expansionary monetary policies affect macroeconomic variables differently. It leads to reduction of unemployment, increases consumer expenditure, leads to economic growth and development and increase private sector borrowing. Increase in private sector borrowing increases the capacity to invest and create more employment opportunities.
Contractionary monetary policies on the other hand aims at reducing the amount of money in supply in the economy. Contractionary monetary policy slows economic growth and development, unemployment increase, it reduces inflation and it can discourage investors from borrowing. Contraction monetary policies are used in most instances to curb growth of inflation rate. This is achieved by raising the interest rates. However, contraction monetary policies can lead to recession in the economy.
Analysis and results
Aggregate demand and aggregate supply model
Aggregate demand and aggregate supply forms an economic model which incorporates the macroeconomic variables and explains the behavior of the economy. Aggregate demand and aggregate supply determines the
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