What effect does expansionary monetary policy have on short-term real interest rates?
A) Expansionary monetary policy tends to push short-term interest rates upward.
B) Expansionary monetary policy tends to push short-term interest rates downward.
C) The effect of expansionary monetary policy on short-term interest rates is unpredictable.
D) Expansionary monetary policy has no effect on short-term interest rates.

Question

Quizplus · Accepted Answer

Expansionary monetary policy aims to increase the money supply in the economy, which tends to lower short-term interest rates. This occurs because as there is more money available to lend, lenders are willing to accept lower interest rates in exchange for borrowers taking out loans. This increased availability of credit can also stimulate economic growth as businesses and consumers have greater access to financing.

What Effect Does Expansionary Monetary Policy Have on Short-Term Real