Expansionary monetary policy involves

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Expansionary monetary policy involves the Federal Reserve injecting money into the economy so the banking system can make more loans and thus increase the money supply even more. The Federal Reserve injected a huge amount of money into the economy in response to the U.S. recession of 2008-09, but banks did not increase their loans very much, so the money supply did not increase by nearly as much as the Federal Reserve wanted. Why do you think that banks were so reluctant to increase their loaning activity? Write a short paragraph explaining your reasons for why banks were so reluctant to increase their lending activity in response to the Fed’s actions. Your discussion should be specific, utilize examples and demonstrate an understanding of the use of monetary policy.

Reference no: EM131164867

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