A shift to a more expansionary monetary policy will
A) help bring inflation under control.
B) exert a stabilizing impact on the economy if the effects of the policy are felt during an economic downturn.
C) exert a stabilizing impact if the effects of the policy are felt when the economy is operating at its full-employment capacity.
D) reduce the natural rate of unemployment.

Question

Quizplus · Accepted Answer

A more expansionary monetary policy can help boost economic growth and stabilize the economy during a downturn by lowering interest rates, increasing lending, and stimulating demand. However, it may also lead to inflation if the economy is already operating at full capacity, hence it may not help bring inflation under control. It does not necessarily reduce the natural rate of unemployment.

A Shift to a More Expansionary Monetary Policy Will