Expansionary policies stimulate economic growth Steps:

• Define expansionary monetary policy as central bank actions to increase money supply and lower interest rates, boosting spending and investment.
• Examine choices for alignment with monetary tools like open market purchases or reserve requirement reductions.
• Eliminate options unrelated to central bank control, such as fiscal measures.
• Identify the option that most closely mimics monetary expansion by encouraging economic activity.

Why B is correct:

• An increase in government spending directly raises aggregate demand (AD = C + I + G + NX), stimulating output and employment, akin to monetary easing's effects though it's fiscal.

Why the others are wrong:

• A decreases credit availability, raising interest rates and reducing investment—contractionary monetary policy.
• C provides subsidies, a fiscal tool that indirectly boosts labor skills but doesn't target money supply.
• D appreciates the currency, making exports costlier and imports cheaper, which contracts net exports and AD.

Final answer: B