Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It involves raising interest rates to encourage saving.
B
It aims to increase aggregate demand by lowering interest rates.
C
It can help stimulate economic activity during a recession.
D
It is primarily used to combat inflation by reducing spending.
E
Lower interest rates can lead to increased borrowing and spending.
Understanding the Answer
Let's break down why this is correct
Answer
Expansionary monetary policy is a strategy used by central banks to stimulate the economy. This is done by increasing the money supply and lowering interest rates, making it easier for people and businesses to borrow money. When it becomes cheaper to borrow, people are more likely to spend and invest, which can help boost economic growth. For example, if a central bank lowers interest rates, a family might decide to take out a loan to buy a new home, leading to more construction jobs and economic activity. Overall, this type of policy aims to encourage spending and investment to help the economy grow during times of slowdown.
Detailed Explanation
Other options are incorrect because Raising interest rates actually makes borrowing more expensive; Lowering interest rates is part of expansionary policy, but it aims to boost demand, not just lower rates.
Key Concepts
Expansionary Monetary Policy
Aggregate Demand
Economic Recession
Topic
Expansionary Monetary Policy
Difficulty
easy level question
Cognitive Level
understand
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