If transfer payments were increasing at the same time monetary policy was used to increase the interest rate:
A) the two policies would work against one another.
B) the combined effect of the two policies would cause the economy to expand more than if either policy were used alone.
C) the combined effect of the two policies would cause the economy to contract more than if either policy were used alone.
D) any one of the above would be as likely to occur as any other.

Question

Quizplus · Accepted Answer

Transfer payments increasing would typically stimulate the economy by increasing consumer spending, while increasing interest rates through monetary policy would likely slow down the economy by making borrowing more expensive. These two policies work in opposite directions, thus working against one another.

If Transfer Payments Were Increasing at the Same Time Monetary