Expansionary monetary policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.
A)higher; higher
B)higher; lower
C)lower; higher
D)lower; lower
E)lower; unchanged

Question

Quizplus · Accepted Answer

Expansionary monetary policy, which involves increasing the money supply and lowering interest rates, typically leads to higher inflation because more money is chasing the same amount of goods and services. It also stimulates economic activity, leading to higher real GDP as businesses expand and consumers spend more.

Expansionary Monetary Policy to Prevent Real GDP from Falling Below