An expansionary monetary policy would and would eventually increase the money supply.

Question

Quizplus · Accepted Answer

An expansionary monetary policy involves increasing the money supply, and reducing short-term interest rates is one of the ways in which this can be achieved. Lower interest rates encourage borrowing and spending, which can stimulate economic activity and increase demand for goods and services. This can lead to higher inflation in the long run, but in the short term, it can help to boost economic growth and reduce unemployment. Selling government bonds on the open market, increasing the target for the overnight interest rate, and selling foreign currency reserves would all have the opposite effect and reduce the money supply. Increasing short-term interest rates would also be contractionary and reduce the money supply.

An Expansionary Monetary Policy Would and Would Eventually Increase the Money