In the money channel, an expansionary monetary policy will in the short run
A)increase the real interest rate.
B)decrease the real interest rate.
C)leave the real interest rate unaffected.
D)have an ambiguous effect on the real interest rate.

Question

Quizplus · Accepted Answer

An expansionary monetary policy involves increasing the money supply and lowering interest rates. Lower interest rates will lead to an increase in borrowing and spending, which will stimulate the economy and increase aggregate demand. This will result in a decrease in the real interest rate in the short run.

In the Money Channel, an Expansionary Monetary Policy Will in the Short