Which of the following would be most indicative of a shift to a more expansionary monetary policy?
A) Rapid expansion in the monetary base, higher  short-term interest rates, and  a decline in the growth rate of the M1 money supply
B) Rapid expansion in the monetary base, declining  short-term  interest rates, and  an increase in the growth rate of the M2 money supply
C) A reduction in the monetary   base, higher  short-term  interest rates, and a decline in the growth rate of the M1 money supply
D) A reduction in the monetary base, lower short-term interest rates, and a decline in the growth rate of the M2 money supply

Question

Which of the following would be most indicative of a shift to a more expansionary monetary policy?
A) Rapid expansion in the monetary base, higher  short-term interest rates, and  a decline in the growth rate of the M1 money supply
B) Rapid expansion in the monetary base, declining  short-term  interest rates, and  an increase in the growth rate of the M2 money supply
C) A reduction in the monetary   base, higher  short-term  interest rates, and a decline in the growth rate of the M1 money supply
D) A reduction in the monetary base, lower short-term interest rates, and a decline in the growth rate of the M2 money supply

Quizplus · Accepted Answer

A shift to a more expansionary monetary policy would involve an increase in the money supply and a decrease in interest rates. A rapid expansion in the monetary base and an increase in the growth rate of the M2 money supply would indicate this type of policy shift. A decline in short-term interest rates would also be expected as a result of this expansionary policy. Option B is the only choice that reflects these indicators.

Which of the Following Would Be Most Indicative of a Shift