Question

Which one of the followings leads to an expansionary monetary policy?A) buying U.S. government securities from the public. B) increasing capital requirements. C) increasing discount rates.D) increasing reserve requirements.

Answer 1

Answer is A. Buying US government securities from public.

In expansionary monetary policy central bank increases the supply of money in public. Here buying of securities means central bank will buy the securities from public and will give cash to pubic. In this way money will go in hands of public which is done in expansionary monetary policy.

All other options are case of contractionary monetary policy in which money with public is decreased.

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