Please write a response to this discussion.

RE: Discussion Unit $2$

The two basic strategies by which the government can control the interest rate to direct the economy are contractionary monetary policy and expansionary monetary policy. First off, managing the nation's finances is greatly aided by monetary policy Let's take a closer look at when might the government need to use these strategies. So$,$ the government may use a contractionary Monetary Policy to raise the interest rates as that would make lending money. Spending would decrease as a result, which might help slow down an overheating economy. The government can lower inflationary pressures and stabilize the economy by raising the cost of borrowing. On the other hand, when the government wants to push for economic expansion and possibly lower interest rates, expansionary monetary policy may be helpful. As a result, borrowing and spending are promoted for both people and businesses. Furthermore, because of the additional jobs and economic activity brought about by the higher expenditure, the economy will improve.

These kinds of events are likely to occur when the government attempts to regulate the overall state of the economy. Contractionary monetary policy is used when there is a risk of inflation, and the economy is expanding too quickly. Usually, expansionary monetary policy is applied in times of weak growth or economic recession. For example, when the COVID$-19$ epidemic hit and things weren't going as planned and people were struggling, the government provided a lot of money, benefits, and resources to those who needed them. Assume for the moment that the government can provide less money now that everything is much more balanced and under control. However, this depends on important variables like GDP$,$ inflation rate, and employment, which leads the government to decide whether to raise or lower inflation rates