Suppose the economy experiences a recessionary gap. Expansionary monetary policy will

Question

Quizplus · Accepted Answer

Expansionary monetary policy involves increasing the money supply, which in turn lowers interest rates. This encourages borrowing and spending, which increases investment and stimulates economic activity. Therefore, answer B is correct because it indicates that expansionary monetary policy will increase investment and decrease interest rates.

Suppose the Economy Experiences a Recessionary Gap