Question

When the Central Bank acts in a way that causes the money supply to increase while aggregate demand remains unchanged, it is:

a. following a contractionary monetary policy.
b. following quantitative easing policy.
c. following a tight monetary policy.
d. following an expansionary monetary policy.

Answer 1

d. following an expansionary monetary policy.

Step-by-step explanation:

Whenever a central bank acts in a way that cause the money supply to increase, it is following an expansionary monetary policy because when money supply increases interest rates will fall and this will encourage people to invest more and not keep their money in the bank which will increase the activity in an economy thus it is an expansionary monetary policy.