Question

Expansionary monetary policy occurs when ________in an effort to stimulate the economy.

A. A central bank acts to increase the money supply.
B. A central bank acts to increase government spending.
C. Congress and the president decrease taxes.
D. Congress and the president increase taxes.
E. A central bank acts to decrease the money supply.

Answer 1

A. A central bank acts to increase the money supply.

Step-by-step explanation:

The main objective of the expansionary policy is to improve the aggregate demand to make up for the shortfalls in the private demand. The Expansionary monetary policy is when the central bank uses some of its tools to increase the money supply to stimulate or boost the economy. It works by expanding of the money supply at a faster rate than the usual. It increases the demands, lowers the rate of interest and increases the money supply.

Answer 2

The right approach is Option A (A central.....................supply).

Step-by-step explanation:

• Expansionary monetary policy decreases inflation throughout the shorter term thereby boosts GDP growth. Furthermore, the average market price increases slightly although flexible costs grow throughout the short term.
• Whilst also devaluing the currency higher than anticipated or reducing simple terms of borrowing costs, the provided current system works.

The other three solutions aren't connected to the situation in question. Therefore the right choice is the above.