Monetary stimulus implies 1 Increasing money supply 2 Purchasing of bonds by the central bank ...........

Economic Affairs Money Supply and Monetary Policy

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Monetary stimulus implies:

1. Increasing money supply

2. Purchasing of bonds by the central bank

3. Reducing interest rates

4. Selling of bonds by the central bank

Select the correct answer using codes given below

1, 2 and 4 only

2 and 3 only

1 and 3 only

1, 2 and 3 only

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Explanation:

Monetary stimulus is generally given in cases of low inflation and
desire to increase money supply in the system to boost growth.
Increasing money supply by the central bank or lowering of interest rates will lead to enhanced supply of money in economy.
Also, purchasing of bonds by the central bank will release more money in the economy thereby increasing the money supply.
However selling of bonds will suck extra money out of economy and could not be regarded as monetary stimulus