In the Activists' Paradise,to increase real GDP without affecting the interest rate,it is necessary to change
A)only fiscal policy and shift the IS curve.
B)only monetary policy and shift the LM curve.
C)fiscal and monetary policies and shift both IS and LM.
D)more policy instruments than policymakers are actually able to manipulate.

Question

Quizplus · Accepted Answer

To increase real GDP without affecting the interest rate, both fiscal and monetary policies need to be adjusted. Fiscal policy can shift the IS curve to increase GDP, while monetary policy can shift the LM curve to keep the interest rate unchanged. This coordinated approach ensures that the increase in GDP does not come with an increase in interest rates.

In the Activists' Paradise,to Increase Real GDP Without Affecting the Interest