In the long run,an expansionary monetary policy will lead to:
A)a decrease in aggregate expenditure.
B)an increase in unemployment.
C)an increase in the price level.
D)an increase in potential output.
E)a decrease in the price level.

Question

Quizplus · Accepted Answer

An expansionary monetary policy involves increasing the money supply and lowering interest rates, which encourages borrowing and spending. This increase in aggregate demand can lead to an increase in the price level, as businesses increase their prices to match the higher demand. It is unlikely to lead to a decrease in aggregate expenditure or an increase in unemployment, as the policy is meant to stimulate the economy. However, it may not necessarily lead to an increase in potential output, as that depends on factors such as technological advancements and capital investments. A decrease in the price level would be more likely with a contractionary monetary policy, which involves reducing the money supply and increasing interest rates.

In the Long Run,an Expansionary Monetary Policy Will Lead To