Question 37
Financial InstitutionsThe Central Bank's expansionary monetary policy is justified at a period
- A.when the inflation rate is high and the economy is experiencing a boom
- B.of economic depression accompanied by low capacity utilization
- C.when trade unions are clamouring for higher wages
- D.when the price of crude petroleum is rising.
Show the answer and explanation
Answer: B (of economic depression accompanied by low capacity utilization)
Explanation
Increasing money supply and lowering interest rates is meant to revive spending when the economy is depressed and factories are idle.