Question

A decrease in the policy interest rate for the purpose of increasing aggregate demand is referred...

A decrease in the policy interest rate for the purpose of increasing aggregate demand is referred to as:

Select one:

a. Contractionary monetary policy

b. Expansionary fiscal policy

c. Expansionary monetary policy

d. Contractionary fiscal policy

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Answer #1

A decrease in the policy interest rate for the purpose of increasing aggregate demand is referred as expansionary monetary policy.

The reason for the same is that when there is a decrease in the policy interest rate by the central bank in order to increase the aggregate demand in an economy then it's called expansionary monetary policy. When there is any policy of central bank, it is termed as monetary policy. And since here the purpose is to increase the aggregate demand in the economy so it will be expansionary rather then contractionary.

So the correct option is C, Expansionary monetary policy

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