Which of the following tools can the central bank use to implement expansionary monetary policy?

The tool that the central bank can utilize to implement expansionary monetary policy is lowering interest rates. By reducing interest rates, the central bank encourages borrowing and spending by consumers and businesses. When interest rates are lower, the cost of loans decreases, leading to increased investment and consumption. This rise in spending can stimulate economic growth, create jobs, and help combat unemployment. Lower interest rates also tend to weaken the currency, making exports cheaper and imports more expensive, further boosting domestic economic activity.

The other options, such as raising taxes and reducing government spending, would generally lead to contractionary fiscal policy, which could decrease overall demand in the economy. Restricting lending also inhibits economic activity by making it more difficult for consumers and businesses to obtain financing, which is contrary to the goals of expansionary monetary policy. Therefore, lowering interest rates is a key strategy that central banks employ to stimulate economic growth during periods of economic downturn or sluggishness.