What is the goal of expansionary monetary policy?

The goal of expansionary monetary policy is to increase the money supply and reduce interest rates in order to stimulate economic activity. This policy is typically implemented by central banks, such as the Federal Reserve in the United States, to encourage borrowing and investing when the economy is sluggish or in recession.

By reducing interest rates, borrowing costs decrease for businesses and consumers. This incentivizes spending and investment, leading to increased demand for goods and services. As demand rises, businesses may respond by hiring more workers, increasing production, and even expanding their operations. This chain reaction can help boost economic growth, reduce unemployment, and lift the overall level of economic activity.

Furthermore, increasing the money supply makes more funds available for banks to lend, thereby further encouraging investment in the economy. This approach is particularly crucial during times of economic downturn, as it aims to counteract the effects of reduced consumer and business confidence.

In contrast, the other answer choices reflect policies or outcomes that do not align with the primary objectives of expansionary monetary policy. For instance, increasing interest rates or decreasing government spending would typically lead to a contraction of the economy, and combating inflation through decreasing the money supply contradicts the intentions of an expansionary stance, which aims to stimulate economic growth rather than curtail