Expansionary monetary policy will have what effect on the components of aggregate demand?
A)Consumption, investment, and net exports will rise.
B)Consumption and investment will rise, but net exports will fall.
C)Consumption will rise, but investment and net exports will fall.
D)Consumption will fall, but investment and net exports will rise.
E)Consumption and investment will rise, but government spending and net exports will fall.

Question

Quizplus · Accepted Answer

Expansionary monetary policy, such as reducing interest rates or increasing the money supply, is designed to stimulate economic growth and increase aggregate demand. This is achieved by increasing the availability of credit, making borrowing cheaper for businesses and consumers. As a result, consumption and investment increase, and net exports are likely to rise due to increased demand for domestic goods and services. Therefore, the correct answer is A.

Expansionary Monetary Policy Will Have What Effect on the Components