Which of the following is an example of expansionary monetar…

JAMB Economics 2023 256 views
Source: JAMB · 2023

Which of the following is an example of expansionary monetary policy by the Central Bank of Nigeria?

  1. Increasing the discount rate
  2. Increasing the reserve ratio
  3. Buying Treasury securities from commercial banks ✓
  4. Lowering income taxes.
Explanation

Expansionary monetary policy increases the money supply. When the central bank buys Treasury securities from commercial banks, it pays them with cash. The banks then have more money to lend.

Raising the discount rate or reserve ratio reduces lending. Lowering income taxes is fiscal policy, not monetary policy.

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