Refer to the graph. Which of the following would best be explained by an expansionary monetary policy?
A) a shift from SML $\mathrm { SML } _ { 1 } \text { to } \mathrm { SML } { } _ { 2 }$
B) a shift from SML $\mathrm { SML } _ { 2 } \text { to } \mathrm { SML } _ { 1 }$
C) a move from $A _ { 1 } \text { to } A _ { 2 }$
D) a move from $A _ { 2 } \text { to } A _ { 3 }$

Question

Refer to the graph. Which of the following would best be explained by an expansionary monetary policy?
A) a shift from SML $\mathrm { SML } _ { 1 } \text { to } \mathrm { SML } { } _ { 2 }$ 
B) a shift from SML $\mathrm { SML } _ { 2 } \text { to } \mathrm { SML } _ { 1 }$ 
C) a move from $A _ { 1 } \text { to } A _ { 2 }$ 
D) a move from $A _ { 2 } \text { to } A _ { 3 }$

Quizplus · Accepted Answer

An expansionary monetary policy involves increasing the money supply and lowering interest rates, which stimulates investment and aggregate demand. This is represented by a shift to the right in the SML curve. Option B shows a shift from SML 2 to SML 1, which represents a decrease in interest rates and an increase in investment, consistent with an expansionary monetary policy.

Refer to the Graph SML1 to SML2\mathrm { SML } _ { 1 } \text { to } \mathrm { SML } { } _ { 2 }SML1​ to SML2​

Refer to the Graph $\mathrm { SML } _ { 1 } \text { to } \mathrm { SML } { } _ { 2 }$