Governments often combine a loose monetary policy with budget deficits in order to ______.

Question

Quizplus · Accepted Answer

Loose monetary policy involves increasing the money supply through measures such as lowering interest rates and making credit more available. This stimulates economic activity by encouraging borrowing, spending, and investment. A budget deficit, on the other hand, involves spending more money than the government is bringing in through revenue. This can also boost economic activity as the government is injecting more money into the economy. Combining these policies can help revive an economy and prevent deflation by increasing spending and investment, creating jobs, and encouraging consumer confidence.

Governments Often Combine a Loose Monetary Policy with Budget Deficits