What is the expected outcome of an effective expansionary monetary policy?

The expected outcome of an effective expansionary monetary policy is stimulated economic growth and increased employment. This type of policy involves actions taken by a central bank, such as lowering interest rates and increasing the money supply, to encourage borrowing and spending by businesses and consumers.

When interest rates are lowered, it becomes cheaper for individuals and businesses to take out loans, which typically leads to increased investment and consumption. Higher consumer spending boosts demand for goods and services, prompting businesses to expand production and hire more workers. As employment increases, incomes rise, further stimulating economic growth in a virtuous cycle.

An effective expansionary monetary policy is designed to address issues such as recession or economic stagnation, aiming to revive economic activity. This is particularly relevant in situations where the economy is operating below its potential, such as during a downturn, making the correct answer align with the intended outcomes of such policies.