An active monetary policy that attempts to smooth out the business cycle would involve conducting ________ monetary policy during recessions and ________ monetary policy during expansions.
A) contractionary; contractionary
B) expansionary; expansionary
C) contractionary; expansionary
D) expansionary; contractionary
E) countercyclical; expansionary

Question

Quizplus · Accepted Answer

An active monetary policy that attempts to smooth out the business cycle would involve conducting expansionary monetary policy during recessions to stimulate economic growth and contractionary monetary policy during expansions to prevent inflation from rising too high. Therefore, D is the correct answer.

An Active Monetary Policy That Attempts to Smooth Out the Business