a) Discuss the effect of expansionary monetary policy on the elements of the GDP expenditure equation, and explain the changes in price level and Real GDP expected from expansionary monetary policy if the economy is currently in recession
Answers
Answered by
0
Expansionary monetary policy can have limited effects on growth by increasing asset prices and lowering the costs of borrowing, making companies more profitable. Monetary policy seeks to spark economic activity, while fiscal policy seeks to address either total spending, the total composition of spending, or both.
Effects of an Expansionary Monetary Policy
- Stimulation of economic growth. An expansionary monetary policy reduces the cost of borrowing. ...
- Increased inflation. The injection of additional money into the economy increases inflation. ...
- Currency devaluation. ...
- Decreased unemployment.
Similar questions