When the Fed conducts expansionary monetary policy, it _______ in the short run, but _______ in the long run.
A) boosts demand; causes inflation
B) causes inflation; boosts output
C) causes inflation; boosts economic growth
D) boosts demand; boosts supply

Question

Quizplus · Accepted Answer

Expansionary monetary policy involves increasing the money supply and lowering interest rates, which stimulates borrowing and spending in the short run, leading to an increase in aggregate demand and output. However, over time, the increased demand can lead to upward pressure on prices, causing inflation.

When the Fed Conducts Expansionary Monetary Policy, It _______ in the Short