Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
To reduce inflation
B
To increase investment and consumption
C
To decrease the money supply
D
To stabilize currency exchange rates
Understanding the Answer
Let's break down why this is correct
Answer
The primary goal of an expansionary monetary policy is to stimulate economic growth. When a central bank, like the Federal Reserve, lowers interest rates or increases the money supply, it makes borrowing cheaper. This encourages businesses to invest in new projects and consumers to spend more money. For example, if a bank offers lower interest rates on loans, a family might decide to buy a new home, which can lead to more jobs in construction and related industries. Overall, the aim is to boost spending and investment to help the economy grow.
Detailed Explanation
The main aim is to boost spending and investment. Other options are incorrect because Some might think this policy aims to lower prices; It's a common mistake to think this policy reduces money in the economy.
Key Concepts
expansionary monetary policy
Topic
Expansionary Policy and Investment
Difficulty
easy level question
Cognitive Level
understand
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