Question

Expansionary monetary policy Group of answer choices 1. lowers interest rates, causing aggregate demand to shift to the right. 2. raises interest rates, causing aggregate demand to shift to the right. 3. raises interest rates, causing aggregate demand to shift to the left. 4. lowers interest rates, causing short-run aggregate supply to shift to the right.5. lowers interest rates, causing aggregate demand to shift to the left.

Answer 1

Answer:

2. raises interest rates, causing aggregate demand to shift to the right.

Explanation:

Expansionary Fiscal Policies try to increase Aggregate demand by :-

• Decrease in taxes by government ; or / and
• Increase in government spending

The government injecting more money in public : by reduced taxes & increased govt spending - increases the aggregate demand .

The government finances this increased public spending with same or  decreased taxes - through borrowings.

The government borrowing funds reduces the loanable funds in capital market, this loans' excess demand in capital markets increase their price i.e Interest.