If a central bank pursues an easy money policy, which of the following is true?

If a central bank pursues an easy money policy, which of the following is true?

• A. Increase interest rates.
• B. Decrease money supply.
• C. Increase money supply and lower interest rates.
• D. Maintain high reserve requirements.

Answer: (C)

An easy money policy aims to stimulate the economy by making borrowing cheaper and more available. That shows up as more money in the system and lower interest rates, encouraging people and businesses to spend and invest. The option that describes both increasing the money supply and lowering interest rates fits this goal best, while the other choices reflect tightening conditions—raising rates, shrinking the money supply, or keeping reserve requirements high.

An easy money policy aims to stimulate the economy by making borrowing cheaper and more available. That shows up as more money in the system and lower interest rates, encouraging people and businesses to spend and invest. The option that describes both increasing the money supply and lowering interest rates fits this goal best, while the other choices reflect tightening conditions—raising rates, shrinking the money supply, or keeping reserve requirements high.