Suppose that a serious recession threatens the economy. An appropriate stabilization policy response might be:

Question

Quizplus · Accepted Answer

Expansionary monetary and fiscal policies are appropriate responses to a serious recession. Expansionary monetary policy involves lowering interest rates to encourage borrowing and spending, while expansionary fiscal policy involves increasing government spending and/or cutting taxes to stimulate the economy. Both are aimed at increasing aggregate demand to counteract the recession.

Suppose That a Serious Recession Threatens the Economy