Monetary policy designed to counteract a reduction in aggregate demand might include

Question

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A reduction in short-term interest rates can incentivize borrowing and spending, which can help increase aggregate demand. A reduction in the money stock (A) could increase interest rates and actually decrease spending, and increasing individual income tax rates (D) could decrease disposable income and further decrease spending. Increased government infrastructure spending (C) is a fiscal policy tool, not a monetary policy tool.

Monetary Policy Designed to Counteract a Reduction in Aggregate Demand