An example of an expansionary monetary policy is ?
Correct answer: D. the Central bank buying government securities in the open market
- A. a reduction in the taxes banks pay on their profits.
- B. an increase in the required reserve ratio
- C. an increase in the discount rate
- D. the Central bank buying government securities in the open market
Explanation
When the central bank buys government securities, it injects reserves into the banking system, expanding the money supply and lowering interest rates. The other listed measures are either contractionary or not a standard expansionary monetary instrument.
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