The economy goes into recession.Which of the following lists contains things policymakers could do to try to end the recession?
A)increase the money supply,increase taxes,increase government spending
B)increase the money supply,increase taxes,decrease government spending
C)increase the money supply,decrease taxes,increase government spending
D)decrease the money supply,increase taxes,decrease government spending

Question

Quizplus · Accepted Answer

To end a recession, policymakers typically implement expansionary fiscal policy, which involves increasing government spending, decreasing taxes, or both. Option C is the only one that includes both increasing the money supply and implementing expansionary fiscal policy by decreasing taxes and increasing government spending. The increase in the money supply can also stimulate the economy by encouraging lending by banks and increasing aggregate demand. Options A and D suggest contractionary fiscal policy by increasing taxes and decreasing government spending, which can exacerbate the recession. Option B includes increasing the money supply, which is expansionary, but contradicts with the contractionary policies of increasing taxes and decreasing government spending.

The Economy Goes into Recession