Effects of Expansionary Monetary Policy

Hard Macroeconomics Monetary And Fiscal Policy

Consider a hypothetical economy where the Central Bank has implemented an expansionary monetary policy in response to a slowing economy. As a result, the interest rates have decreased significantly. Based on the principles of monetary and fiscal policy, which of the following outcomes is most likely to occur in this economy?

Decrease in consumer spending due to higher savings.

Increase in investment spending by businesses.

Higher unemployment rates caused by reduced aggregate demand.

Hint

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