Macroeconomics

MCQ - 218-4228

Question:

Which of the following is a predictable advantage of expansionary monetary policy in a recession?

It decreases aggregate demand so that the price level falls, which increases demand for the dollar.
It increases investment, which increases aggregate demand and increases employment.
It increases aggregate demand, which increases real GDP and increases the unemployment rate.
It increases investment, which increases aggregate demand and increases employment.
It decreases the interest rate, which attracts foreign investment in U.S. financial assets.

Correct Answer: B

Explanation:

Know how monetary policy affects investment, AD, and employment.

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