Keeping the money supply constant over the business cycle is an example of:
A) active monetary policy.
B) active fiscal policy.
C) passive monetary policy.
D) passive fiscal policy.

Question

Quizplus · Accepted Answer

Keeping the money supply constant over the business cycle is an example of passive monetary policy, as there is no active intervention to adjust the money supply in response to changes in the economy. Active monetary policy refers to deliberate actions taken by a central bank to affect the money supply and/or interest rates in order to stabilize the economy. Active fiscal policy refers to government actions to adjust spending and taxation levels in response to economic conditions. Passive fiscal policy refers to a government taking no action to adjust spending or taxation levels in response to economic conditions.

Keeping the Money Supply Constant Over the Business Cycle Is