Practice Questions
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What is a potential negative consequence of expansionary monetary policy that can lead to economic instability?
When the government increases money supply, people have more cash to spend. Other options are incorrect because Some might think that more money means...
How can a central bank's reduction in the discount rate potentially lead to asset bubbles in the economy?
When the central bank lowers the discount rate, it makes loans cheaper. Other options are incorrect because This option suggests that lowering the dis...
What is the primary tool that central banks use to increase the money supply during an expansionary monetary policy?
When central banks lower reserve requirements, banks can keep less money in reserve. Other options are incorrect because Some might think raising inte...
How does borrowing during an expansionary monetary policy primarily influence consumer spending and business investment?
When the government makes borrowing cheaper, people and businesses can spend more. Other options are incorrect because Some might think that borrowing...
Which of the following outcomes is most likely associated with expansionary monetary policy in the context of increasing money supply and lowering interest rates?
When the money supply increases and interest rates go down, people can borrow money more easily. Other options are incorrect because Some might think ...
What is the primary goal of expansionary monetary policy?
The main aim of expansionary monetary policy is to boost the economy. Other options are incorrect because Some might think this policy is about loweri...
What is the primary role of central banks in implementing expansionary monetary policy?
Central banks lower interest rates to make borrowing cheaper. Other options are incorrect because Some might think that increasing interest rates help...
What is the primary goal of expansionary monetary policy?
The main aim is to boost jobs and help the economy grow. Other options are incorrect because Some might think this policy means less money in the econ...
What is the correct sequence of events that occurs when a central bank implements expansionary monetary policy during a recession?
When a central bank lowers interest rates, it makes borrowing cheaper. Other options are incorrect because This option suggests raising interest rates...
How does expansionary monetary policy primarily aim to combat a recession?
Lowering interest rates makes it cheaper to borrow money. Other options are incorrect because Some think raising interest rates helps control prices; ...
In response to a recession, a central bank may implement __________ monetary policy to increase borrowing and spending. This approach typically involves lowering interest rates to boost aggregate demand.
Expansionary monetary policy helps the economy grow. Other options are incorrect because Some might think contractionary policy helps during a recessi...
Which of the following are true statements about expansionary monetary policy? Select all that apply.
Other options are incorrect because Raising interest rates actually makes borrowing more expensive; Lowering interest rates is part of expansionary po...
Which scenario best illustrates the application of expansionary monetary policy and its expected effects on the economy?
When the central bank lowers interest rates, it makes borrowing cheaper. Other options are incorrect because This option suggests raising interest rat...
During a severe economic downturn, the central bank decides to implement an expansionary monetary policy by lowering interest rates. As a result, a small business owner named Sam expects to increase his borrowing to invest in new equipment. How might this decision affect the overall economy in terms of aggregate demand?
Lowering interest rates makes loans cheaper. Other options are incorrect because Some might think that too much borrowing will hurt businesses; It's a...
How would a central bank's decision to lower interest rates impact an economy in recession?
Lowering interest rates makes loans cheaper. Other options are incorrect because Some might think lower rates mean people save more; It's a common bel...
If a central bank lowers interest rates during a recession, what is the most likely underlying effect on economic activity?
When interest rates go down, borrowing money becomes cheaper. Other options are incorrect because Some might think that higher interest rates are need...
Expansionary monetary policy is to economic stimulation as lowering a dam's gates is to what?
Lowering a dam's gates lets more water flow out. Other options are incorrect because Some might think lowering the gates means less water in the reser...
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