If aggregate demand shifts because of a wave of pessimism about stock prices,those who favor a policy that "leans against the wind" would advocate the
A)Federal Reserve increase the money supply or the government increase taxes.
B)Federal Reserve increase the money supply or the government decrease taxes.
C)Federal Reserve decrease the money supply or the government increase taxes.
D)Federal Reserve decrease the money supply or the government decrease taxes.

Question

Quizplus · Accepted Answer

Leaning against the wind involves counteracting economic fluctuations. A wave of pessimism would decrease aggregate demand, so increasing the money supply or decreasing taxes would stimulate demand and counteract the downturn.

If Aggregate Demand Shifts Because of a Wave of Pessimism