Expansionary monetary policy:?

Question

A) increases aggregate demand

B) increases GDP or the price level

C) increases consumption spending

D) does all of the above

Answer 1

Imagine, if everyone gets a check from the government for 600 dollars, (A) aggregate demand will increase, (B) people will buy more stuff, increasing the GDP and also prices from the increased demand, and (C) people will increase the amount they spend on consumption (but their propensity to consume may not change, or may even decline if they suspect bad times are coming).

So the answer is D.

Answer 2

D. Expansionary monetary policy means increasing money supply to stimulate an economy. When there is more money, businesses hire more workers. More workers mean more consumption. More consumption means more demand and higher GDP. Eventually, the economy can overheat and give rise to high inflation, and then comes the time for contractionary monetary policy. Events don't necessarily have to happen in that order, but, hopefully, you get the idea.

Answer 3

D