If monetary and fiscal policy are going to promote economic stability, they must _________ during a recession, and _________ during an economic boom. (Fill in the blank)
A) add stimulus; apply restraint
B) apply restraint; add stimulus
C) add stimulus; add stimulus
D) apply restraint; apply restraint

Question

If monetary and fiscal policy are going to promote economic stability, they must _________ during a recession, and _________ during an economic boom.  (Fill in the blank)
A) add stimulus; apply restraint
B) apply restraint; add stimulus
C) add stimulus; add stimulus
D) apply restraint; apply restraint

Quizplus · Accepted Answer

During a recession, the economy needs a boost, so the government should add stimulus, either through monetary policy (lowering interest rates) or fiscal policy (increasing government spending or cutting taxes). Conversely, during an economic boom, the government should apply restraint to prevent inflation, often through monetary policy (raising interest rates) or fiscal policy (cutting government spending or increasing taxes). Therefore, option A is the correct answer.

If Monetary and Fiscal Policy Are Going to Promote Economic