Answer to Question #51257 in Macroeconomics for bob

Question

State True, False or Uncertain. When an economy goes into recession, a central bank that is interested in targeting inflation should pursue an expansionary monetary policy

Answer 1

An expansionary monetary policy is policy that seeks to expand the money supply to encourage economic growth. It will lead to the increase in inflation. A contractionary monetary policy is intended to slow inflation in order to avoid the resulting distortions and deterioration of asset values. So, it is more appropriate to use contractionary monetary policy.