Expansionary monetary policy decreases interest rates in the short run. What is the effect of expansionary monetary policy in the medium run?
A)Positive
B)Neutral
C)Negative
D)Depends on GDP

Question

Quizplus · Accepted Answer

Expansionary monetary policy is neutral on interest rates in the medium run.
Key Takeaway: Expansionary monetary policies are those policies implemented by governments to increase the size of the money supply in a country. While such policies decrease interest rates in the short run (thereby increasing investment and output), they are neutral in the medium run as they are offset by a contraction in the real value of money.

Expansionary Monetary Policy Decreases Interest Rates in the Short Run