Question

“The Bangladesh Bank has created additional money worth Tk70,794 crore through various refinance schemes and easing regulatory requirements after the Covid-19 outbreak in March for stimulating demand to revive the declining economy. Please answer question( a) with details.

. a) What type of monetary policy is this? Expansionary or contractionary?

Answer 1

This is an expansionary monetary policy. Here the central bank is trying to support and revive the declining economy by using various measures. '

Monetary policy where a central bank uses tools to stimulate the economy is called as expansionary monetary policy. Expansionary monetary policy uses tools like lowering of interest rates, or lower reserve ratio or infusing money through any other means to increase money supply etc.

In the above case, Bangladesh bank is trying to revive the economy by increasing money supply by infusing additional money worth Tk 70,794 crore through various refinance schemes and easing regulatory requirement and thus increase demand in the economy.