If policy makers wanted to use both monetary and fiscal policy to help reduce a high rate of inflation,which of the following would be most appropriate?
A) a larger budget deficit, the purchase of securities in the open market by the Fed, and a higher discount rate
B) a government budget surplus, the sale of securities in the open market by the Fed, and a higher discount rate
C) a larger government budget deficit, the sale of securities in the open market by the Fed, and a lower discount rate
D) a government budget surplus, the purchase of securities in the open market by the Fed, and a lower discount rate

Question

Quizplus · Accepted Answer

A government budget surplus reduces aggregate demand, the sale of securities in the open market decreases money supply, and a higher discount rate makes borrowing more expensive, all of which help to reduce inflation.

If Policy Makers Wanted to Use Both Monetary and Fiscal