Question

Expansionary policies are intended to _____ economic growth, and contractionary policies are intended to _____ economic growth.

Answer 1

Answer: Expansionary policies are intended to increase economic growth, and contractionary policies are intended to decrease economic growth.

Explanation:

Expansionary policies refer to policies which aim at encouraging or increasing economic growth. The Central Bank makes use of these policies to increase the money supply in the economy thereby expanding it and lowers interest rates.

Contractionary policies refer to the policies used by the Central government to fight inflation and reduce government spending in the economy. These policies raise interest rate in the economy in order to make lending more expensive and as a result decrease economic growth of the nation.

Answer 2

Expansionary policies are intended to ENCOURAGE / INCREASE economic growth, and contractionary policies are intended to REDUCE economic growth.

Expansionary policies increase the total supply of money in the economy. It is used to combat unemployment in a recession by lowering interest rates.

Contractionary policies decrease the total money supply. It is used in raising interest rates in order to combat inflation.