Suppose the central bank implements expansionary monetary policy. Which of the following will occur in the short run?

Question

Quizplus · Accepted Answer

Expansionary monetary policy is aimed at increasing the money supply, which leads to lower interest rates and increased spending by consumers and businesses. This, in turn, leads to an increase in aggregate demand, causing an increase in output and a decrease in unemployment. However, the increase in spending can also lead to an increase in the price level due to higher demand for goods and services. Therefore, all of the above choices are correct.

Suppose the Central Bank Implements Expansionary Monetary Policy