ACCOMODATIVE MONETARY POLICY

This happens when a government’s central bank (like the US Federal Reserve) tries to increase the money supply of the country when the growth of the economy is slowing as measured by the country’s GDP to boost its activities. The accommodative monetary policy is done to encourage investors and consumers to spend more by making borrowing money less expensive through low interest rates. In addition, the central bank has also the right to buy Treasuries from the open market to add capital to the weakening economy.

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