Monetary and fiscal policy
A)are controlled by the Federal Reserve.
B)are controlled by the U.S. Treasury.
C)can and do cause fluctuations in aggregate demand.
D)do not affect output.

Question

Quizplus · Accepted Answer

Both monetary and fiscal policy can impact aggregate demand and cause fluctuations in the economy. The Federal Reserve controls monetary policy through setting interest rates and regulating the money supply, while the U.S. Treasury and Congress control fiscal policy through government spending and taxation. These policies can affect consumer and business behavior, leading to changes in overall output and employment levels. Therefore, D is an incorrect choice. A is partially correct as the Federal Reserve controls monetary policy, but not fiscal policy. B is incorrect as the U.S. Treasury controls fiscal policy, not monetary policy.

Monetary and Fiscal Policy