Question

You can lead a horse to water but you can't make it drink. How might this adage be relevant to expansionary monetary policy?

Answer 1

Answer:

The purpose of expansionary monetary policy is to increase the supply of money in the economy which would theoretically make it cheaper for people to borrow money to consume or for companies to borrow money for investment.

The whole thing therefore relies on people and companies borrowing. Sometimes however, monetary policy may work in increasing the amount of money in the economy but then a situation arises where people do not want to borrow and companies do not want to borrow for investment either because they do not think the economy is strong enough for expansion or for whatever other reason. .

They are being given cheaper access to money (led to the water) but they refuse to borrow and invest (can't be made to drink).