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Identify one of the following which can NOT be used to close deflationary gap

Economics
JAMB 2023

Identify one of the following which can NOT be used to close deflationary gap

  • A. Increased interest rate
  • B. Increased money supply
  • C. Increase government expenditure
  • D. Reduction in taxes
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Correct Answer: Option A
Explanation

- Monetary policy is implemented by reducing the interest rates in the economy in order to increase the supply of money to enhance growth.

- The fiscal policy is implemented by the reduction of taxes and increasing government spending in order to boost demand.

- Policymakers may choose to implement a stabilization policy to close the recessionary gap and increase real GDP.


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