Question

Expansionary monetary policy to prevent real gdp from falling below potential real gdp would cause the inflation rate to be relatively ________ and real gdp to be relatively ________.

Answer 1

Answer: Expansionary monetary policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be relatively higher and real GDP to be relatively higher.

Explanation: The expansionary monetary policy - a central bank uses their tools to stimulate the economy. A central bank pay increase the supply of money, lower interest rate and help increase demand. Real GDP (gross domestic product) is adjusted for inflation to show the value of all goods and services that an economy produced in any given year.