Which of the following is an accurate statement concerning the tradeoff to the economy resulting from monetary policy?

Question

Quizplus · Accepted Answer

An expansionary monetary policy aims to increase money supply and stimulate the economy through increased spending. However, the tradeoff is the increased pressure on prices, which may lead to inflation. The buying of securities from a contractionary monetary policy may result in an increase in interest rates and a decreased price level, but it may also lead to decreased borrowing and investment, which can harm output and result in a recession. The selling of securities in a contractionary monetary policy may also lead to higher interest rates, making it more expensive for businesses to borrow and potentially resulting in decreased investment and higher unemployment. However, this statement is not an accurate description of the tradeoff resulting from monetary policy.

Which of the Following Is an Accurate Statement Concerning the Tradeoff