Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Decrease in asset bubbles
B
Increase in consumer spending
C
Reduction in inflation
D
Increase in unemployment rates
Understanding the Answer
Let's break down why this is correct
Answer
Expansionary monetary policy aims to boost the economy by increasing the money supply and lowering interest rates. When the central bank lowers interest rates, borrowing becomes cheaper for businesses and individuals, which encourages them to take loans to invest or spend. For example, if a bank reduces its interest rates, a family might decide to buy a new home because their monthly payments will be lower. As more money flows into the economy through spending and investment, this can lead to increased economic growth and potentially lower unemployment rates. However, if too much money is added too quickly, it might also lead to inflation, where prices rise.
Detailed Explanation
When the money supply increases and interest rates go down, people can borrow money more easily. Other options are incorrect because Some might think that more money means less risk of asset bubbles; It's a common belief that increasing money supply reduces inflation.
Key Concepts
money supply
interest rates
asset bubbles
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.