Expansionary monetary policy

Expansionary monetary policies is the act of increasing the money supply so that the interest rate goes down and output increases.

Expansionary monetary policy is used when the economy is under-performing and needs to be stimulated.

Contractionary monetary policy

Contractionary monetary policy is the act of decreasing the money supply so that the interest rate increases and decreases.

Contractionary monetary policy is used when the economy is overheating and the central bank wants to slow down output to reduce the inflationary pressure.

Usually governments want to "slow down" the economy when it is producing above its long run level of output as when output is above the natural level of output inflation starts to accelerate.