In the IS-LM model,we can be at natural real GDP with a low interest rate given the combination of ________ fiscal policy and ________ monetary policy.

Question

Quizplus · Accepted Answer

To be at natural real GDP with a low interest rate, a combination of tight fiscal policy and easy monetary policy is needed. Tight fiscal policy helps control inflation and overheating of the economy, while easy monetary policy lowers interest rates to stimulate investment and consumption.

In the IS-LM Model,we Can Be at Natural Real GDP