If the Fed's goal is to hold income constant,an expansionary fiscal policy must be accompanied by ________ monetary policy,and the Fed must allow the interest rate to ________ significantly.
A)an expansionary,rise
B)an expansionary,fall
C)a contractionary,rise
D)a contractionary,fall

Question

Quizplus · Accepted Answer

To counteract the inflationary effects of an expansionary fiscal policy and keep income constant, the Fed would need to implement a contractionary monetary policy. This would typically lead to higher interest rates as the supply of money is reduced.

If the Fed's Goal Is to Hold Income Constant,an Expansionary