Suppose that the government wants to increase income without changing the interest rate.How can they accomplish this?
A)Increase government spending and reduce the money supply.
B)Increase government spending and the money supply.
C)Increase taxes and the money supply.
D)Reduce government spending and increase the money supply.

Question

Quizplus · Accepted Answer

Increasing government spending and the money supply would lead to an increase in income without changing the interest rate. When the government spends money, it injects new money into the economy which can increase the overall level of economic activity and income. Increasing the money supply can also help stimulate economic growth by increasing the amount of money available for borrowing and spending. However, increasing government spending and the money supply can also lead to inflation if not managed properly.

Suppose That the Government Wants to Increase Income Without Changing