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.
Question
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.
Solution
The correct answer is:
b. Increasing money supply and decreasing interest rates
Here's why:
Expansionary monetary policy is a form of economic policy used by central banks to combat low growth periods. The aim is to increase the supply of money in the economy and reduce interest rates.
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Increasing money supply: By increasing the money supply, central banks aim to encourage economic activity. More money circulating in the economy means businesses and individuals can borrow more easily, which can lead to increased spending and investment.
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Decreasing interest rates: Lower interest rates make borrowing cheaper. This encourages businesses to invest and individuals to spend, rather than save. This increased spending can stimulate economic growth.
So, in summary, expansionary monetary policy involves increasing the money supply and decreasing interest rates to stimulate economic growth.
Similar Questions
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
Done: View To do: Go through the activity to the endYou have earned 2 point(s) out of 3 point(s) thus far.Which of the following best describes the cause-and-effect chain of an expansionary monetary policy? A decrease in the money supply will raise the interest rate, decrease investment spending, and decrease aggregate demand and GDP. A decrease in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP. An increase in the money supply will raise the interest rate, decrease investment spending, and decrease aggregate demand and GDP. An increase in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP.
Which of the following would come from expansionary monetary policy?Multiple choice question.An increase in the interest ratesAn increase in the money supplyAn increase in taxesAn increase in government spending
Under expansionary monetary supply,a.the economy’s money supply is increased by reducing interest rates,b.the economy’s money supply is reduced by reducing interest rates,c.the economy’s money supply is reduced by increasing interest rates,d.the economy’s money supply is increased by increasing interest rates,
How does expansionary monetary policy generally impact economic activity?Question 29Answera.Stimulates economic growth and increases aggregate demandb.Slows down economic activity and decreases aggregate demandc.Has no impact on economic activityd.Reduces government spending
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