Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It shifts the demand curve to the right, increasing both price and quantity.
B
It shifts the supply curve to the left, decreasing price and increasing quantity.
C
It shifts the demand curve to the left, decreasing both price and quantity.
D
It shifts the supply curve to the right, decreasing price and increasing quantity.
Understanding the Answer
Let's break down why this is correct
Answer
An expansionary monetary policy is when a country's central bank makes it easier for people and businesses to borrow money, usually by lowering interest rates. When interest rates go down, people are more likely to take out loans to buy things like houses or cars, and businesses may invest in new projects. This increase in spending boosts demand for goods and services. In a supply and demand graph, the demand curve shifts to the right because more people are buying, leading to a higher equilibrium price and quantity. For example, if a new policy makes loans cheaper, a family might decide to buy a new car, increasing the demand for cars and pushing up both the price and the number of cars sold.
Detailed Explanation
Expansionary monetary policy means more money is available. Other options are incorrect because This answer suggests that supply decreases, which is not true; This option says demand decreases, which is the opposite of what happens.
Key Concepts
economic graphs
market equilibrium
monetary policy effects
Topic
Graphing Economic Impacts
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.