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Molodets [167]
3 years ago
15

What is a potential negative effect of an expansionary policy?

History
1 answer:
Andrei [34K]3 years ago
4 0

Answer:

Increased Inflation.,

Cutting interest rates isn’t guaranteed to cause a strong economic recovery. Expansionary monetary policy may fail under certain conditions.

If confidence is very low, then people may not want to invest or spend, despite lower interest rates.

In a credit crunch, banks may not have funds to lend, therefore although the Central Bank cuts base rates, it is still difficult to get a loan from a bank.

Commercial banks may not pass the base rate cut on.

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