If monetary policymakers fear a recession resulting from increased pessimism on the part of business people, and they want to avoid the recession, they would:
A) shift the monetary policy reaction curve to the right.
B) shift the monetary policy reaction curve to the left.
C) likely lower their target rate for inflation.
D) encourage fiscal policymakers to act.

Question

Quizplus · Accepted Answer

Shifting the monetary policy reaction curve to the right means that policymakers will be more accommodative and increase the money supply, which should encourage borrowing and spending. This increase in spending can help boost economic activity and prevent a recession resulting from increased pessimism among business people.

If Monetary Policymakers Fear a Recession Resulting from Increased Pessimism