CFA Level 1
Economics

Impact of Fiscal and Monetary Policy During a Recession

Hard Macroeconomics Monetary And Fiscal Policy

In the context of an economy experiencing a recession, the government decides to implement a fiscal stimulus package to boost economic activity. This package includes increased government spending and tax cuts. At the same time, the central bank adopts a monetary policy stance characterized by lowering the interest rates. Given these two simultaneous policies, which of the following statements best describes their combined effect on the economy?

Hint

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