Question:
Expansionary monetary policy implies which of the following about the discount rate, policy interest rates, and aggregate demand respectively?
(1) Decrease, Increase, Decrease
(2) Increase, Decrease, Decrease
(3) Increase, Increase, Decrease
(4) Decrease, Decrease, Increase
(5) Increase, Increase, Increase
Correct Answer:
(4)
Answer Explanation:
Expansionary monetary policy aims to stimulate the economy. The Central Bank lowers both the discount rate and policy interest rates to make borrowing cheaper, which encourages investment and consumption, thereby increasing Aggregate Demand.
Topic: Monetary Policy Year: 2023
Leave a Reply