Does expansionary monetary policy increase interest rates?

Expansionary monetary policy can lead to an increase in interest rates, but it depends on the specific circumstances. When a central bank implements an expansionary monetary policy, it aims to increase the money supply, which can stimulate economic activity and boost employment.

However, this increase in the money supply can also lead to higher inflation, which can cause lenders to demand higher interest rates to compensate for the loss in purchasing power of the money they lend out. Additionally, an increase in economic activity can lead to increased demand for credit, which can also push up interest rates. Therefore, while expansionary monetary policy can initially lower interest rates, it is possible that over the longer term, it may cause interest rates to rise.

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