If policymakers wanted to use both monetary and fiscal policy to help reduce a high rate...
If policymakers wanted to use both monetary and fiscal policy to help reduce a high rate of inflation, which of the following would be most appropriate?
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A government budget surplus, the sale of securities in the open market by the Fed, and a higher discount rate.
Could somebody explain why this is true?
Homework Answers
Answer:
The above statement is true
As the inflation has to be decreases means that the money supply has to be reduced this can be done by sale of securities as cash is taken against these securities which decreases budget deficit or increase budget surplus , also higher discount rates means less loans thus low money supply thus lower inflation.
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