Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Increasing water flow downstream
B
Decreasing water levels in the reservoir
C
Reducing the risk of flooding
D
Diverting water to a different river
Understanding the Answer
Let's break down why this is correct
Answer
Expansionary monetary policy is like opening the gates of a dam to let more water flow into a river. When a central bank lowers interest rates or increases the money supply, it encourages people and businesses to borrow and spend more, which stimulates the economy. Similarly, when the gates are opened, more water flows downstream, which can help crops grow and support local communities. Just as the extra water can boost economic activity in an area, expansionary monetary policy aims to increase economic growth and reduce unemployment. For example, if a country is facing a recession, the central bank might lower interest rates, making it cheaper for people to take out loans and buy homes or cars, just as opening the dam allows more water to nourish the land.
Detailed Explanation
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 reservoir; One might believe that lowering the gates prevents flooding.
Key Concepts
Expansionary Monetary Policy
Economic Activity
Aggregate Demand
Topic
Expansionary Monetary Policy
Difficulty
medium level question
Cognitive Level
understand
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