According to Monetarists, an Expansionary fiScal Policy Is a Weak

question 220

Multiple Choice

According to monetarists, an expansionary fiscal policy is a weak stabilization tool because

• A) the asset demand for money varies inversely with the rate of interest.
• B) government borrowing to finance a deficit will raise the interest rate and reduce private investment.
• C) government borrowing will reduce the supply of money in circulation and depress the GDP.
• D) government borrowing to finance a deficit will lower interest rates, increase money balances, and lower velocity.

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