Fully accommodating monetary policy results in
A)a constant interest rate.
B)the simple fiscal-policy multiplier of Chapter 3.
C)an increase in the money supply when there is a rise in government spending.
D)All of these.

Question

Quizplus · Accepted Answer

Fully accommodating monetary policy means that the central bank adjusts the money supply to fully offset the effects of any fiscal policy changes. This results in a constant interest rate (choice A) and the simple fiscal-policy multiplier of Chapter 3 (choice B). Additionally, an increase in government spending would lead to an increase in the money supply to offset the effects of the spending (choice C). Therefore, choice D is the correct answer.

Fully Accommodating Monetary Policy Results in