The purpose of an expansionary monetary policy is to increase:
A) The GDP-gap
B) The inflation rate
C) Real GDP
D) Interest rates

Question

Quizplus · Accepted Answer

The purpose of an expansionary monetary policy is to increase the supply of money and credit in the economy, which stimulates consumer spending and business investment. This increased demand leads to an increase in Real GDP, as businesses produce more goods and services to meet the demand. Additionally, an expansionary monetary policy can also lead to a decrease in interest rates, which further incentivizes borrowing and investment. However, if left unchecked, an expansionary monetary policy can also contribute to higher inflation rates.

The Purpose of an Expansionary Monetary Policy Is to Increase