In comparison to when monetary policy is not expansionary, under an expansionary monetary policy, the unemployment rate is ____and the inflation rate is_____ over time.

Question

Quizplus · Accepted Answer

Under an expansionary monetary policy, the central bank increases the money supply, making it easier for businesses and consumers to access credit, and lowering the cost of borrowing. As a result, more people are likely to take out loans to invest or spend, leading to an increase in demand for goods and services. This in turn leads to higher economic growth and lower unemployment rates as more people find jobs. However, the increased demand can also lead to higher prices which may eventually increase inflation rates. Therefore, the unemployment rate is likely to be lower, while the inflation rate is likely to be higher under an expansionary monetary policy.

In Comparison to When Monetary Policy Is Not Expansionary, Under