The primary goal of an expansionary monetary policy is to increase the demand of goods and services in an economy. Contractionary monetary policy, on the other hand, intends to decrease the total demand of the economy of a particular given region.
A policy that is adopted by a team of financial leaders with an intention to control the situation of economy in the region as such to ensure smooth functioning of the economy.
The monetary policy that intends to increase the demand in an economy is expansionary in nature, and the one that decreases the demand is known as a contractionary monetary policy.
Hence, the significance of a monetary policy is aforementioned.
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