contractionary monetary policy combined expansionary fiscal policy quizlet Expansionary monetary policy

A contractionary monetary policy combined with an expansionary fiscal policy will Quizlet

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What is contractionary monetary policy?

Contractionary policy is a monetary measure referring either to a reduction in government spending—particularly deficit spending—or a reduction in the rate of monetary expansion by a central bank.

Which of these results from the implementation of a contractionary monetary policy?

An unwanted side effect of a contractionary monetary policy is a rise in unemployment. The economic slowdown and lower production cause companies to hire fewer employees. Therefore, unemployment in the economy increases.

Why would the government ever want to use contractionary fiscal policy quizlet?

A contractionary fiscal policy would be used when the economy is experiencing an expansionary gap. An indication of this would be high inflation. Government spending could be decreased and/or taxes could be increased.

What happens in expansionary monetary policy?

Expansionary monetary policy works by expanding the money supply faster than usual or lowering short-term interest rates. It is enacted by central banks and comes about through open market operations, reserve requirements, and setting interest rates.

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