ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Monetary policy is thought to increase aggregate demand through expansionary tools. These include lowering interest rates and engaging in open market operations (OMO) to purchase securities. These have the effect of making it easier and cheaper to borrow money, with the hope of incentivizing spending and investment.

Detailed explanation-2: -Aggregate demand increases when the components of aggregate demand–including consumption spending, investment spending, government spending, and spending on exports minus imports–rise.

Detailed explanation-3: -Autonomous tightening or easing of monetary policy means changes in the autonomous part of consumption, investment and government spending, which do not depend on the aggregate output of the economy.

Detailed explanation-4: -Answer and Explanation: The income of consumers is held constant when a demand curve is constructed. Changes in income cause the demand curve to move from its position and, therefore, income needs to be assumed to be constant.