Which action is an example of expansionary monetary policy?
Correct answer: A. Buying government securities in the open market
- A. Buying government securities in the open market
- B. Increasing the policy interest rate
- C. Selling government securities in the open market
- D. Raising the required reserve ratio
Explanation
When a central bank buys government securities, bank reserves and the money supply tend to increase, putting downward pressure on interest rates. The other actions generally reduce lending and aggregate demand.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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