Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It decreases consumer spending and discourages business investment.
B
It increases consumer spending but has no effect on business investment.
C
It usually increases both consumer spending and business investment.
D
It has no measurable effect on either consumer spending or business investment.
Understanding the Answer
Let's break down why this is correct
Answer
Expansionary monetary policy means that the central bank, like the Federal Reserve, lowers interest rates or increases the money supply to encourage economic growth. When interest rates are low, borrowing money becomes cheaper for consumers and businesses. This encourages consumers to take out loans to buy things like cars and homes, and businesses to invest in new projects or equipment, which can create more jobs. For example, if a bank lowers its interest rates, a family might decide to buy a new house because their mortgage payments will be lower. As more people spend money and businesses invest, the economy grows, leading to more opportunities for everyone.
Detailed Explanation
When the government makes borrowing cheaper, people and businesses can spend more. Other options are incorrect because Some might think that borrowing lessens spending; It's a common mistake to think only consumers benefit.
Key Concepts
borrowing
consumer spending
business investment
Topic
Expansionary Monetary Policy
Difficulty
hard level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.