Question

If the Federal Reserve adopts an expansionary monetary policy, A) interest rates fall and credit is tight. B) interest rates rise and credit is tight. C) interest rates rise and credit is abundant. D) interest rates fall and credit is abundant.

Answer 1

Answer: interest rates fall and credit is abundant.(D)

Explanation:

Monetary policy is the macroeconomic policy used by the central bank of a country to achieve its macroeconomic objective such as full employment, economic growth, price stability etc. It involves the use of money supply and interest rate to control the economy.

Expansionary monetary policy is when a central bank uses interest rate and money supply to stimulate the economy. This is done by increasing the money supply, and lowering the interest rates. This leads to increase in aggregate demand and also boosts economic growth.

Answer 2

Answer:

interest rates fall and credit is abundant

Explanation:

The Federal Reserve's monetary policy is one of the ways in which the U.S. government tries to regulate the nation's economy by controlling the money supply. It needs to balance economic growth with increasing inflation. If it adopts an expansionary monetary policy, it increases economic growth but also accelerates the rate of inflation. If it adopts a contractionary monetary policy, it seeks to reduces inflation but also inhibits growth

When the Federal Reserve decreases the reserve ratio, it lowers the amount of cash that banks are required to hold in reserves, allowing them to make more loans to consumers and businesses. This increases the nation's money supply and expands the economy

Monetary policy is the macroeconomic policy used by the central bank of a country to achieve its macroeconomic objective such as full employment, economic growth, price stability etc. It involves the use of money supply and interest rate to control the economy.

Expansionary monetary policy is when a central bank uses interest rate and money supply to stimulate the economy. This is done by increasing the money supply, and lowering the interest rates. This leads to increase in aggregate demand and also boosts economic growth.