What effect will expansionary monetary policy tend to have?
A)It will tend to decrease the money supply and increase interest rates.
B)It will tend to decrease the money supply and lower interest rates.
C)It will tend to increase the money supply and increase interest rates.
D)It will tend to increase the money supply and lower interest rates.

Question

Quizplus · Accepted Answer

Expansionary monetary policy involves increasing the money supply by buying government bonds or lowering reserve requirements, which leads to banks having more money to lend. This increase in available funds leads to a decrease in interest rates, as banks compete for borrowers. Therefore, choice D is correct, as expansionary monetary policy tends to increase the money supply and lower interest rates.

What Effect Will Expansionary Monetary Policy Tend to Have