Which of the following is an example of an expansionary monetary policy?
A) a reduction in government purchases of goods and services
B) an increase in the discount rate
C) an open market sale of U.S. government securities
D) a reduction in the required reserve ratio
E) a tax cut

Question

Quizplus · Accepted Answer

A reduction in the required reserve ratio lowers the amount of reserves that banks must hold, freeing up more money for banks to lend, which stimulates economic activity and encourages borrowing and spending. This is an expansionary monetary policy.

E is also correct as a tax cut can increase disposable income and aggregate demand, but it is not a monetary policy.

Which of the Following Is an Example of an Expansionary