In the IS and MP framework, an expansionary monetary policy causes aggregate output to ________ and the interest rate to ________, everything else held constant.
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase

Question

Quizplus · Accepted Answer

An expansionary monetary policy typically lowers interest rates to stimulate borrowing and investment, which in turn increases aggregate output.

In the IS and MP Framework, an Expansionary Monetary Policy