Impact of Short-Term Expansionary Monetary Policy on the Economy Based on the Keynesian ModelChinas Monetary Policy in the Post-Epidemic Era as an Example

Abstract

China has entered the post-epidemic period since 2023. The monetary policy of the central bank is crucial in controlling China's macro economy in light of the three-year impacts of the pandemic of coronavirus disease 2019(COVID-19) and the present downturn in the country's GDP. The People's Bank of China, the nation's central bank, has been implementing expansionary monetary policy on the overall economy. Using the Keynesian theoretical model, this article primarily examines the short-term impacts of expansionary monetary policy, or an increase in the nominal money supply, on the real income of Chinese individuals, the total production of the nation's economy, and interest rates. The analysis concludes that an expansionary monetary policy can decrease interest rates and increase real income and total production for citizens in short term. The Keynesian model provides a theoretical perspective on the relevance of the central bank's expansionary monetary policy based on the status of the economy today.