If the government raised taxes and reduced government spending in order to reduce the budget deficit,monetary policy could accommodate this policy by

Question

Quizplus · Accepted Answer

Increasing the money supply can accommodate the contractionary fiscal policy (raising taxes and reducing government spending) by making more money available in the economy, which can help offset the decrease in demand resulting from the government's actions. This can help stabilize interest rates and maintain economic growth.

If the Government Raised Taxes and Reduced Government Spending in Order