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Generally speaking contractionary monetary policies and expansionary monetary policies involve changing the level of the money supply in a country. Expansionary monetary policy is simply a policy which expands (increases) the supply of money, whereas contractionary monetary policy contracts (decreases) the supply of a country's currency.
In the United States, when the Federal open market committee wishes to increase the money supply, it can do a combination of three things:
Purchase securities on the open market, known as open market operations
Lower the Federal discount rate
Lower Reserve requirements
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Jul 26th, 2015
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