Principles of Macroeconomics / Unit 12 MAC 1128 short lesson, about 20 seconds
Expansionary and Contractionary Stances
Captions available
The idea
Expansionary policy, also called loose, adds reserves and lowers rates to shift aggregate demand right. Contractionary policy, also called tight, does the reverse to hold down inflation. Policy should lean against the cycle.
In practice
The same tool serves both; only the direction changes.
Where people slip
Whether a central bank should target inflation alone or weigh unemployment too is disputed and unsettled.
Your place on the trail
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