The intended effect of an expansionary monetary policy is that aggregate demand:
A) increases,raising real GDP growth only in the long run.
B) increases,raising inflation and real GDP growth in both the short run and the long run.
C) increases,raising real GDP growth in the short run,but only inflation rises in the long run.
D) remains unchanged while the economy's long-run potential growth rate increases.

Question

Quizplus · Accepted Answer

Expansionary monetary policy typically increases aggregate demand, leading to higher real GDP growth in the short run. However, in the long run, its main effect is often just an increase in inflation, as the economy adjusts and the temporary boost to real GDP fades.

The Intended Effect of an Expansionary Monetary Policy Is That