How does monetary policy affect aggregate demand during an economic recession, particularly in relation to achieving full employment?

Monetary policy is a tool used by central banks to manage the economy, especially during tough times like a recession. When the economy slows down, people lose jobs and spend less money, which lowers aggregate demand—the total amount of goods and services people want to buy. To help increase demand, central banks can lower interest rates, making it cheaper for individuals and businesses to borrow money. For example, if a bank lowers its interest rates, a small business might take out a loan to expand, hire more workers, and boost spending. By encouraging borrowing and spending, monetary policy aims to bring the economy back to full employment, where everyone who wants a job can find one.