Question

Which action taken by a central bank would reflect expansionary monetary

policy?
• A. Raising reserve requirements for all banks
• B. Raising the interest that it pays to banks on the balance of their
reserves
XO C. Selling treasury securities to banks to reduce the money supply
V D. Lowering the discount rate to provide more loans to banks





D. Lowering the discount rate to provide more loans to banks

Answer 1

Decreasing the discount rate.

Purchasing government securities.

Reducing the reserve requirement.

All of these options have the same purpose; to expand the money supply for the country.

Step-by-step explanation:

A central bank, such as the Federal Reserve in the U.S., will use expansionary monetary policy to strengthen an economy.

The three key actions by the Fed to expand the economy include a decreased discount rate, buying government securities, and a lowered reserve ratio.

Quantitative easing is another monetary policy tool used by central banks.

The Fed implemented an expansionary policy during the 2000s following the Great Recession, lowering interest rates and utilizing quantitative easing.

An expansionary monetary policy goes hand in hand with an expansionary fiscal policy, the latter of which is managed by the government.