What are two reasons the U.S. Federal Reserve System may pursue an expansionary monetary policy?

The choice highlighting the encouragement of bankers to make loans and cutting the cost of borrowing correctly identifies two primary goals of expansionary monetary policy. This type of policy is typically pursued by the Federal Reserve during periods of economic downturn or when there's a risk of recession. The central idea is to stimulate economic activity by making borrowing cheaper and more accessible.

When the Federal Reserve lowers interest rates or employs other measures such as purchasing government securities, it increases the money supply in the economy. This reduction in borrowing costs incentivizes banks to extend more loans to businesses and consumers. As borrowing becomes more affordable, both individuals and companies are more likely to take out loans for spending and investment purposes, which can help drive economic growth.

This mechanism leads to increased consumer spending and investment by businesses, creating a ripple effect in the economy that can help counteract slowdowns. By effectively increasing the availability of credit, expansionary monetary policy aims to bolster economic activity and foster growth.