ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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To increase the money supply to grow the economy.
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To decrease the money supply to slow down the economy.
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To increase the money supply to slow down the economy.
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The decrease the money supply to grow the economy.
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Detailed explanation-1: -Lower interest rates decrease the cost of borrowing money, which encourages consumers to increase spending on goods and services and businesses to invest in new equipment.
Detailed explanation-2: -The goal of expansionary monetary policy is to grow the economy, particularly in times of economic trouble. The overall aim is to increase consumer and business spending by increasing the money supply through a variety of measures that improve liquidity.
Detailed explanation-3: -If the Fed, for example, buys or borrows Treasury bills from commercial banks, the central bank will add cash to the accounts, called reserves, that banks are required keep with it. That expands the money supply.
Detailed explanation-4: -Easy money policy, or expansionary monetary policy, is a central bank policy that lowers short-term interest rates. As a result, it makes money less expensive to borrow to boost economic development.
Detailed explanation-5: -Expansionary monetary policy aims to spur economic growth through increased liquidity. Increased money supply promotes economic growth. It occurs because corporations and individuals look to capitalize upon the easily available funds by undertaking greater investments, expanding operations, and increasing consumption.