If an economy is experiencing inflation which one of the following MONETARY poli

Question

If an economy is experiencing inflation which one of the following MONETARY policies would be most effective?

A. Decrease Government Spending

B. Lower the required reserve ratio

C. Increase the Money Supply

D. Sell Bonds

If there were a decrease in the wage rates while there was a simultaneous increase in business taxes then you would expect to see the price level__________.

A. not enough information

B. increase

C. fall

D. remain constant

An increase in Government spending (without crowding out) would cause all of the following except ...

A. the level of GDP to rise

B. the price level to rise

C. The AD curve to shift right

D. The AD curve to shift left

Explanation / Answer

If the Inflation is demand pull type, then reducing the money supply helps tackling the problem. Sell bonds is the monetary policy which sells bonds and extracts money out of the economy.

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