Suppose an economy falls into a recession.The central bank responds by rapidly increasing the money supply.Best for the central bank is the case where

Question

Quizplus · Accepted Answer

A downward-sloping IS curve implies that as the interest rate falls, investment and consumption increase, which stimulates demand and helps the economy recover from a recession. This is the desired effect when the central bank increases the money supply to combat a recession.

Suppose an Economy Falls into a Recession