What is the policy of easy money?

Easy money policy is a policy in which the government or central bank ensures that consumers and business debtors easily access money. The central bank can take different steps to increase money inventory, making it easier to obtain loans. During the recession of the government, they often accept easy money policy as a means of stimulating economic growth. Banks generate profits by lending money for a low interest rate and lend the same money for a much higher interest rate. The less it costs the bank to borrow money, the less bank fees for lending this money to consumers and businesses. As a result, the reduction of interest rates is usually a key part of the policy of easy money. Do not back back government bonds from banks and creditors. Banks can use this additional cash to create new loans because consumer and commercial loans pay much higher revenues than government bonds. The government can also release the rules related to loan subscriptions to make people and entities easierby limited funds or poor credit to obtain funding.

businesses that have access to cheap loans can be easier to afford to hire new employees, expand traffic and develop new products. As businesses are expanding, unemployment decreases and an increased number of people have one -off income that they have to spend in other businesses. When consumer expenditure increases, business profits are increasing, and more businesses can expand. In addition to increased earnings, consumers are able to borrow cheap loans and can more easily afford to buy luxury and expensive items such as cars and houses.

In the short term, the policy of easy money helps to prevent the country from engaging in a serious recession. In the long run, it causes easy money to inflation, because the prices of commodities from houses to gold are driven by supply and demand and more cash means higher prices. IncapWhen the economy begins to recover from the recession, government creators must carefully time for a moment to change their fiscal policy. If cheap money is easily accessible for too long, inflation could become the main problem, but if the government soon increases interest rates, it could derail economic recovery.