Macroeconomics

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Monetary Policy Options

MACRO-6TYWC7

Assume that there are strong inflationary pressures.

In a Keynesian framework, the monetary authority (often referred to as the central bank) would do which of the following to respond to inflation?

A

Increase government spending.

B

Increase taxes.

C

Increase the money supply.

D

Decrease the money supply.

E

Decrease government spending.