According to monetarists,an expansionary fiscal policy:
A) will be ineffective because the interest rate will rise and crowd out private investment spending.
B) should not be permitted so long as a public debt exists.
C) should be used only when unemployment exceeds 6 percent of the labor force.
D) will be effective,provided the money supply is held constant.

Question

Quizplus · Accepted Answer

Monetarists believe that an expansionary fiscal policy will be ineffective because it will lead to an increase in interest rates, which will in turn crowd out private investment spending. This is because the policy will lead to an increase in demand for borrowing, which will drive up interest rates. As a result, businesses and individuals will be discouraged from borrowing and investing in the economy. Therefore, A is the correct answer.

According to Monetarists,an Expansionary Fiscal Policy