ECONOMICS
ECONOMIC GROWTH
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Increase in government spending and increase in the rate of interests
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Decrease in taxes and increase in the money supply
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Decrease in taxation and decrease in the rate of interests
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Increase in government spending and increase in interest rates
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Detailed explanation-1: -A combination of fiscal and monetary policies can be used to restore an economy to full employment. Fiscal and monetary policies are frequently used together to restore an economy to full employment output. For example, suppose an economy is experiencing a severe recession.
Detailed explanation-2: -Policy tools for stimulating the economy include interest rate cuts, government spending increases, and quantitative easing. Policymakers generally direct stimulus programs toward key economic sectors to take advantage of multiplier effects that they hope will indirectly increase private sector spending.
Detailed explanation-3: -One of the commonly used measures to control inflation is controlling the money supply in the economy. If the Government decreases the supply of money, then the demand will fall, leading to a fall in prices. Therefore, the Government may decide to withdraw certain paper notes and/or coins from circulation.
Detailed explanation-4: -An expansionary fiscal policy and a contractionary monetary policy would cause the interest rate to rise, investment demand to decrease but would have an indeterminate effect on aggregate demand.