Statement I: Inflationary recessions cannot be cured by conventional monetary and fiscal policies.
Statement II: If a recession is ended by strong fiscal policy stimulus,interest rates will tend to rise during recovery.

Question

Quizplus · Accepted Answer

Both statements are true. Statement I is correct because inflationary recessions, characterized by high inflation and economic downturn simultaneously, often prove resistant to traditional monetary and fiscal policies due to the conflicting nature of addressing inflation and stimulating economic growth. Statement II is true because strong fiscal policy stimulus, aimed at ending a recession, typically increases demand in the economy, which can lead to higher interest rates as part of the economic recovery process, reflecting the increased demand for money and credit.

Statement I: Inflationary Recessions Cannot Be Cured by Conventional Monetary