If the economy is in a recession, an appropriate combination of monetary and fiscal policies might be to:
A)increase taxes, lower government spending, expand the money supply
B)increase taxes, raise government spending, expand the money supply
C)decrease taxes, raise government spending, expand the money supply
D)decrease taxes, lower government spending, contract the money supply

Question

Quizplus · Accepted Answer

During a recession, the government should increase aggregate demand. This can be done through a combination of expansionary monetary and fiscal policies. The Federal Reserve should increase the money supply, which helps to lower interest rates and stimulate borrowing and spending. The government should also increase government spending and decrease taxes to encourage consumer spending and business investment. Therefore, the appropriate combination of policies during a recession is to decrease taxes, raise government spending, and expand the money supply.

If the Economy Is in a Recession, an Appropriate Combination