ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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lower federal taxes.
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lower interest rates.
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raise medicare coverage.
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raise unemployment insurance.
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Detailed explanation-1: -An expansionary monetary policy may reduce interest rates in the short run. But it may also boost national output and inflation. Increases in output and inflation often lead to higher interest rates in the long run.
Detailed explanation-2: -A monetary policy that lowers interest rates and stimulates borrowing is known as an expansionary monetary policy or loose monetary policy. Conversely, a monetary policy that raises interest rates and reduces borrowing in the economy is a contractionary monetary policy or tight monetary policy.
Detailed explanation-3: -If inflation is too high, tightening monetary policy (which raises interest rates in the economy) will help to bring inflation back towards the target, but will also be likely to reduce economic growth and put upward pressure on unemployment, all else being equal.
Detailed explanation-4: -The main short term effect of monetary policy is to alter aggregate demand with changing interest rates.