ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The U.S. expansionary monetary policy causes an increase in GNP, a depreciation of the U.S. dollar, and an increase in the current account balance in a floating exchange rate system according to the AA-DD model.

Detailed explanation-2: -Expansionary monetary policy is when a central bank uses its tools to stimulate the economy. That increases the money supply, lowers interest rates, and increases demand. It boosts economic growth. It lowers the value of the currency, thereby decreasing the exchange rate.

Detailed explanation-3: -Expansionary policy also known as loose fiscal policy increases the force of loanable finances in the economy. As a result, the interest rates drop in an economy.

Detailed explanation-4: -Through these channels, monetary policy influences spending, investment, production, employment, and inflation in the United States. Effective monetary policy complements fiscal policy to support economic growth.