The fed's strategy of increasing the money supply and lowering interest rates in order to increase real gdp is called
a. contractionary fiscal policy
b. expansionary monetary policy
c. expansionary fiscal policy

B. Expansionary monetary policy

Explanation:

Monetary policy is often referred to as "expanding" or "contractionary" monetary policy. While expansionary monetary policy means increasing the total money supply in the economy, contractionary monetary policy, contrary to the expansionary monetary policy, means reducing the total money supply in the economy. While expansionary monetary policy is generally applied to overcome the unemployment (recession) in the economy (assuming that the amount of money that increases as a result of the increase in money supply will decrease the interest which is the price of money); Contractionary monetary policy is implemented in order to reduce the inflation rate (assuming that the decrease in money supply will raise interest rates, the rising interest rate will decrease the marginal consumption trend of people and increase the marginal saving trend).

As from above, we can summarized that the expansionary monetary policy is the answer to the question and shortly it is when a central bank uses its tools to stimulate the economy. This policy will raise the money supply, decrease interest rates, and increases aggregate demand. It makes soar the growth of gross domestic product in turn, lessen the value of the currency, thereby decreasing the exchange rate.

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