Considering only its direct effect on income, expansionary monetary policy tends to:
A)increase income and imports, shifting the U.S. trade balance in the direction of deficit.
B)increase income and imports, shifting the U.S. trade balance in the direction of surplus.
C)decrease income and imports, shifting the U.S. trade balance in the direction of deficit.
D)decrease income and imports, shifting the U.S. trade balance in the direction of surplus.

Question

Quizplus · Accepted Answer

Expansionary monetary policy typically increases income by lowering interest rates, which stimulates investment and consumption. Higher income increases demand for imports, potentially leading to a larger trade deficit.

Considering Only Its Direct Effect on Income, Expansionary Monetary Policy