Which action taken by a central bank would reflect expansionary monetary policy?A.Raising the interest that it pays to banks on the balance of their reservesB.Selling treasury securities to banks to reduce the money supplyC.Lowering the discount rate to provide more loans to banksD.Raising reserve requirements for all banks
Question
Which action taken by a central bank would reflect expansionary monetary policy?A.Raising the interest that it pays to banks on the balance of their reservesB.Selling treasury securities to banks to reduce the money supplyC.Lowering the discount rate to provide more loans to banksD.Raising reserve requirements for all banks
Solution
The action that would reflect an expansionary monetary policy by a central bank is C. Lowering the discount rate to provide more loans to banks.
Here's why:
Expansionary monetary policy is a form of economic policy that involves reducing interest rates, buying government securities, and other ways to increase the money supply and stimulate economic growth.
A. Raising the interest that it pays to banks on the balance of their reserves - This would be a contractionary policy as it encourages banks to hold more reserves and lend less.
B. Selling treasury securities to banks to reduce the money supply - This is also a contractionary policy as it takes money out of the economy.
C. Lowering the discount rate to provide more loans to banks - This is an expansionary policy as it makes borrowing cheaper for banks, encouraging them to make more loans and increase the money supply.
D. Raising reserve requirements for all banks - This is a contractionary policy as it reduces the amount of money banks can lend out.
Similar Questions
Expansionary monetary policy involves:Question 23Select one:a.Decreasing money supply and increasing interest ratesb.Increasing money supply and decreasing interest ratesc.Decreasing both money supply and government expendituresd.Decreasing both the government spending and taxese.Decreasing both interest rates and taxes.
Which tool would the Federal Reserve use as part of an expansionary monetary policy?A.Selling treasury securities on the open marketB.Raising the discount rate for short-term loansC.Raising the interest rate for bank reservesD.Lowering the reserve requirement on banks
How does expansionary monetary policy affect banks?Question 7Answera.Lowers interest rates and increases bank lendingb.Raises interest rates and decreases bank lendingc.Has no impact on banksd.Reduces the money supply
Which of the following options contains only examples of expansionary monetary policy actions?A.Open-Market Purchase; Decrease policy rate; Decrease minimum reserve ratio; Increase interest rate on reserve accountB.Open-Market Purchase; Increase policy rate; Decrease minimum reserve ratio; Decrease interest rate on reserve accountC.Open-Market Sales; Decrease policy rate; Decrease minimum reserve ratio; Decrease interest rate on reserve accountD.Open-Market Purchase; Decrease policy rate; Decrease minimum reserve ratio; Decrease interest rate on reserve account
Which of the following actions of a Central Bank would increase the money supply in the economy? (Tick all that apply).This is a multi answer question. You can select one or more options as the answer.A.Unconventional monetary policy action through asset buyback program.B.Increasing the policy rates by the Central Bank.C.Increase in term funding facilities to financial institutions with a lower interest rate.D.Central Bank providing forward guidance to the market indicating higher future interest rates.
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.