How do I respond and ask a question : Hello Class, What is Monetary Policy? Monetary policy is a set of tools a nations central bank uses to control the supply of money to achieve economic growth. These tools are things like revising interest rates, changing bank reserve requirements, discount rates, and open market operations. Revising interest rates the central bank loans to the nations banks allows for more money to either be circulated or collected. Depending on the adjustment to the loans changes how loan interest rates for homes or businesses owners can receive. If the Fed or central bank decide to manipulate the reserve requirements, that means the are telling banks how much they must retain in order to meet the liabilities of their customers. For those who do not know a bank does not just store everyone's money, they take portions of you money to loan out to others in order to make more reserves. The reserve requirement is the limit in which once reached a bank can no longer loan money out. Open market operations include selling and buying government bonds or raising foreign exchange rates, doing so helps adjust the reserve balances. Utilizing these types of tools allows for the central bank to control the quantity of money available to the economy. What is Contractionary Monetary Policy? A contractionary policy is a monetary policy that is put in place to reduce government spending. These policies include raising interest rates, increase bank reserve requirements, and selling government bonds. Contractionary policies help fight rising inflation. An example of this would be 2022 near the end of the COVID pandemic, we had growing signs of inflation. Many companies were unable to produce enough supply because of the stimuli that was given to the people so the supply chain got held up causing a rise in prices around the world. Even though it caused a strong economic rebound to the economy it also caused a huge rise in inflation. Federal reserve decided to raise the target range for the federal funds rate to combat this. From a business perspective this would not be the time for expansions or major projects because the cost on loans, land, research, and construction will all be higher and have higher interest rates. What is Expansionary Monetary Policy? A expansionary policy is a monetary policy that is put in place to increase consumer spending and borrowing rates. This is usually done buy lowering interest raters, using fiscal policies, cutting taxes, and putting money back into the economy. Doing so with the intent to boost consumer spending businesses investments. Recent examples of this during COVID 2020 would be the Federal government lowing interest rates and the stimulus checks that were issued out. This is the time to expand for businesses loans would be cheaper and taxes would be more relaxed allowing for money to go farther