Definition: Expansionary monetary policy is when the Federal Reserve is using its tools to stimulate the economy. This usually means lowering the Fed Funds rate to increase the money supply. This will cause mortgage rates to decline, consumers to borrow and spend, and businesses to grow, thereby hiring more workers who will consume even more. The opposite is contractionary monetary policy.
Examples:
If the Federal Reserve is lowering interest rates, it is engaging in expansionary monetary policy.
