A loose monetary policy might help the economy recover to its potential GDP if it were experiencing high unemployment, a recession, and poor output. As a result, option (A) is the preferable one.
Expansionary monetary policy, commonly referred to as loose monetary policy, boosts the availability of credit and money to encourage economic growth. In difficult economic times, a central bank may implement an expansionist monetary policy to lower unemployment and increase growth.
The rate decreases when the central bank adopts a loosening policy, often known as injecting cash into the economy by acquiring or borrowing securities.
Hence, option (A) is accurate.
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