When Expansionary Monetary Policy Pushes Interest Rates Downward to a Low

question 44

Multiple Choice

When expansionary monetary policy pushes interest rates downward to a low level,

• A) the velocity of money will decline, which will weaken the expansionary impact on demand and nominal GDP.
• B) the velocity of money will increase, which will strengthen the expansionary impact on demand and nominal GDP.
• C) the prices of stocks and other real assets can be expected to fall, which will weaken the impact of the expansionary policy on demand and nominal GDP.
• D) the earnings derived from savings accounts will increase, which will stimulate demand and nominal GDP.

---

Definitions:

Cash Flow

The net amount of cash and cash-equivalents moving into and out of a business, crucial for assessing the liquidity of an entity.

Trading Investments

Securities that a company holds for the purpose of selling them in the near term to profit from short-term price fluctuations.

Depreciation Expense

A non-cash expense that reduces the value of tangible assets over their useful life due to wear and tear or obsolescence.

Indirect Method

A method for preparing the cash flow statement, where net income is adjusted for non-cash transactions and changes in working capital.