Expansionary Monetary Policy
Plain definition
Central bank actions that increase the money supply and lower interest rates to stimulate spending, output, and employment.
In economics
Expansionary monetary policy fights recessions and deflation: lower rates cheapen borrowing for consumers and firms, asset purchases inject reserves, and easier credit raises aggregate demand. The trade-off is inflation risk if stimulus overshoots, plus asset bubbles and a weaker currency as side effects.
Example
During the 2008 financial crisis, the Fed cut rates to near zero and bought trillions in securities (quantitative easing). Mortgage rates fell, refinancing surged, and the added liquidity helped pull the economy out of the deepest downturn since the Great Depression.
Expansionary monetary policy is confused with expansionary fiscal policy. Monetary easing comes from the central bank (rates, asset purchases); fiscal expansion comes from the government (spending up, taxes down). Both raise aggregate demand but through different channels and institutions.