The Swiss National Bank (SNB) recently cut interest rates from 1.5% to 0.25% between March and December 2024. This is an example of:

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The question describes the Swiss National Bank reducing its policy interest rate from 1.5% to 0.25% between March and December 2024. This move is a classic example of how central banks use monetary policy to influence the economy by changing the price and availability of money.

Option a: Expansionary monetary policy. This choice is correct because cutting a policy rate lowers the cost of borrowing and typically stimulates borrowing and spending, boosting aggregate demand and economic activity in the short run.

Option b: Contractionary monetary policy. This would involve raising interest rates or tightening credit conditions to cool inflation or an overheating economy. Since the policy rate was reduced, this option describes the opposite of what happened.

Option c: Expansionary fiscal policy. Fiscal policy involves the government altering its spending and tax policies, not central-bank interest rates. The SNB’s action changes monetary conditions, not fiscal measures, so this is not accurate.

Option d: Contractionary fiscal policy. This would mean reducing government spending or increasing taxes, which is unrelated to the described central-bank rate cut and thus incorrect.

In sum, the rate cut is best understood as expansionary monetary policy, aimed at stimulating economic activity through looser monetary conditions.

EC301 Principles of Macroeconomics

The Swiss National Bank (SNB) recently cut interest rates from 1.5% to 0.25% between March and December 2024. This is an example of:

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EC301 Principles of Macroeconomics

The Swiss National Bank (SNB) recently cut interest rates from 1.5% to 0.25% between March and December 2024. This is an example of:

View Explanation

Log in for full answers

Similar Questions

Which of the following agencies has primary responsibility for setting monetary policy and regulating the banking system?

Why is psychology important in a country’s monetary policy?

If the economy is producing an equilibrium real output that is less than potential output, a(n):

The RBA can stimulate the economy by _____, all of which shifts the aggregate demand to the _____.

If the cash rate is increased, the RBA is trying to:

Select the option that correctly shows all the missing words in the following sentence.Monetary policy is the management of ________ by changing money _______ for the purpose of adjusting aggregate _____.

Which of the following is NOT a Monetary policy tool available to the FED?

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

The RBA can stimulate the economy by _, all of which shifts the aggregate demand to the _.

Select the option that correctly shows all the missing words in the following sentence.Monetary policy is the management of ____ by changing money _ for the purpose of adjusting aggregate ___.