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Monetary Policy: The Federal Reserve

Question 17 • IL-Economics

The potential to cause inflation is accompanied by [___]monetary policy.

Answer
A
expansionary
B
contractionary

Explanation

Expansionary monetary policy increases the money supply and encourages borrowing and spending. If demand grows faster than the economy’s ability to produce goods and services, prices can rise, causing inflation. Contractionary policy instead slows spending to help reduce inflation.

AI-written and checked against the verified answer.

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