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Monetary policy rests on the relationship between the rates of interest in an economy and the total supply of money. Monetary policy uses a variety of tools to either one or both of these, to influence the outcomes like economic growth, inflation, exchange rates with other currencies and unemployment. Inflation is one of the major issues faced by any country. Inflation is the decline of purchasing power of money. Today’s paper and plastic money can easily loose their value as the money should be backed up by the same amount of gold reserve. When the gold reserve is low or there is excess of paper money in the market then it will lead to inflation and in worst cases bankruptcy of banks. So, considering these issues, the Govts. Monetary policy is referred to as being expansionary policy or contractionary policy. In expansionary policy the supply of money increases in the economy. And in contractionary policy the supply of money decreases. Expansionary policy is adopted by Govts to encourage the growth rate of the economy.

Contracationary Policy is adopted by the Govts to decrease the money supply in the economy. When there is a higher amount of inflation in the economy and the purchasing power of money is rapidly falling, then the Govt resorts to such a practice. The amount of money flowing into the economy can be controlled by certain simple measures. These measures can be increase the rate of interests for the money borrowed and this will discourage the people borrowing from banks. And banks might have to increase their reserves in the Central bank, there by reducing the money with the banks. Compared to fiscal policies where the taxes have to be increased to control the flow of money, many Govts prefer to use contractionary policy to curtail the rate of inflation. Our network spans 3 continents and several countries. We offer three kinds of services: Assignment Help, Thesis Help and Online Tuitions for students in their college or University.