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Question & Answer
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It generally leads to an increase in employment as businesses invest more due to lower interest rates.
It results in a decrease in employment as inflation rises uncontrollably.
It has no significant effect on employment levels during a recession.
It only impacts employment in certain sectors, leaving others unaffected.
Understanding the Answer
Let's break down why this is correct
Lowering interest rates makes loans cheaper. Other options are incorrect because Some think lower rates always cause big inflation that hurts jobs; Many think that a recession means no change.
Key Concepts
Expansionary Monetary Policy Effects
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Deep Dive: Expansionary Monetary Policy Effects
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Definition
Expansionary monetary policy involves the central bank reducing interest rates to stimulate aggregate demand, leading to increased output and decreased unemployment. This policy aims to address cyclical unemployment and boost real income in the short run.
Topic Definition
Expansionary monetary policy involves the central bank reducing interest rates to stimulate aggregate demand, leading to increased output and decreased unemployment. This policy aims to address cyclical unemployment and boost real income in the short run.
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