If aggregate demand shifts because of a wave irrational exuberance,those who favor lean against the wind policy would advocate the

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Quizplus · Accepted Answer

Lean against the wind policy aims to moderate the effects of economic fluctuations by taking counteractive measures. In this case, the wave of irrational exuberance has led to an increase in aggregate demand, which may result in inflationary pressures. To address this, the government and the Federal Reserve need to adopt contractionary policies to reduce aggregate demand. This can be done by decreasing government spending, increasing taxes, and decreasing the money supply. Hence, the best choice is C, where the Federal Reserve decreases the money supply, or the government increases taxes, or both.

If Aggregate Demand Shifts Because of a Wave Irrational Exuberance,those