the Central Bank's expansionary monetary policy is justified at a period?

Answer Details

Expansionary monetary policy refers to when a central bank increases the money supply in the economy to stimulate economic growth. It can be justified in a period of economic depression accompanied by low capacity utilization because the goal is to boost spending and encourage businesses to invest in new projects, creating jobs and increasing output. This type of policy is typically used when interest rates are already low and traditional fiscal policies are not effective. In contrast, when the economy is experiencing a boom with high inflation rates, expansionary monetary policy can exacerbate inflationary pressures by injecting more money into the economy, potentially leading to even higher inflation rates. When trade unions are clamouring for higher wages, it may be necessary to increase interest rates to prevent inflation from rising too quickly. Finally, the price of crude petroleum is a factor that can affect the economy, but it alone is not sufficient to determine the need for an expansionary monetary policy.