Question

Assume that the economy is at full employment and is experiencing rapid inflation. Which of the following combinations of monetary and fiscal policies would reduce inflation most, assuming the dollar values for both policy changes are the same amount?

Answer 1

The right answer for the question that is being asked and shown above is that: "Monetary Policy Sell government securities; Fiscal Policy Increase the federal budget deficit." This the combination of monetary and fiscal policieswould reduce inflation most, assuming the dollar values for both policy changes are the same amount.