Explain two ways in which central banks use monetary policy to influence the economy.

Monetary policy, the instruments by which central banks and adjust the value and supply of a currency, most notably take the forms of interest rate changes and credit expansions. Firstly, the lowering of interest rates by central banks increases the demand for loans which in turn can increase investment and consumption, raising GDP. Secondly, the expansion of the money supply via tools including quantitative easing provides commercial banks with adequate liquidity during crises in an effort to prevent insolvencies and the resulting loss of deposits.