Suppose that the economy is currently at full employment.All other things being equal, if the government implements restrictive policies then the appropriate monetary policy is
A)no change from the current policy.
B)reduce the growth of the money supply.
C)constant growth of the money supply.
D)increase the growth of the money supply.

Question

Quizplus · Accepted Answer

When the government implements restrictive policies, such as reducing government spending or increasing taxes, it can lead to a decrease in aggregate demand. To counteract the potential negative impact on the economy and maintain full employment, the appropriate monetary policy would be to increase the growth of the money supply. This can help stimulate economic activity by lowering interest rates, encouraging borrowing and spending.

Suppose That the Economy Is Currently at Full Employment