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    Question

    Fill in the Blanks: _____________ involves

    changing the interest rate and influencing the money supply. _____________ involves the government changing tax rates and levels of government spending to influence aggregate demand in the economy.
    A Fiscal Policy, Fiscal Policy Correct Answer Incorrect Answer
    B Fiscal Policy, Monetary policy Correct Answer Incorrect Answer
    C Fiscal Policy, Economic Policy Correct Answer Incorrect Answer
    D Monetary Policy, Monetary policy Correct Answer Incorrect Answer
    E Monetary policy, Fiscal Policy Correct Answer Incorrect Answer

    Solution

    Monetary policy is typically implemented by a central bank, while Fiscal Policy decisions are set by the national government. Both monetary and fiscal policy may be used to influence the performance of the economy in the short run.

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