If an economy experiences high interest rates and high unemployment,the ISLM framework predicts that ________ policy has been too ________.
A)fiscal;expansionary
B)fiscal;contractionary
C)monetary;expansionary
D)monetary;contractionary

Question

Quizplus · Accepted Answer

In the ISLM framework, high interest rates and high unemployment signal a contractionary monetary policy, as the high interest rates indicate a tight restriction on the money supply, which decreases investment and economic activity, leading to high unemployment. Thus, the correct option is D, monetary policy has been too contractionary.

If an Economy Experiences High Interest Rates and High Unemployment,the