If the Bank of Canada pursues expansionary monetary policy, then

Question

Quizplus · Accepted Answer

Expansionary monetary policy involves increasing the money supply, which leads to lower interest rates and an increase in GDP. Therefore, option D is the correct answer. Option A and B are incorrect as they suggest that expansionary monetary policy would decrease the money supply, which is contradictory. Option C is incorrect as it suggests that increasing interest rates will lead to an increase in GDP, which is not in line with economic theory. Option E is also incorrect as it suggests that increasing the money supply will lead to a decrease in GDP, which is not what expansionary monetary policy aims to achieve.

If the Bank of Canada Pursues Expansionary Monetary Policy, Then