Question

Everything else held constant, an autonomous (i.e. discretionary) expansionary monetary policy (i.e. lowering interest rates) ________ aggregate ________.

a. decreases; demand
b. increases; supply
c. decreases; supply
d. increases; demand

Answer 1

Answer: d. increases; demand

Step-by-step explanation:

Autonomous expansionary policy by the Central bank of a nation is what happens when the central bank is engaging in actions that are increasing the amount of money in the nation.

With more money available for spending, people will want to buy more of the things they want which will increase aggregate demand.

Companies as well as people will also be able to access loanable funds at cheaper interest rates and so will borrow more for investment which will also increase aggregate demand.