A government wants to raise real GDP and plans to rely only on fiscal and monetary policies. Which mixture of measures is most likely to be the most effective in meeting this objective?
- Afiscal policy: increase in the budget deficit; monetary policy: central bank buys back government bonds
- Bfiscal policy: increased government spending on roads; monetary policy: increased short term rate of interest
- Cfiscal policy: reduce income taxes; monetary policy: central bank sells more government bonds
- Dfiscal policy: reduce wealth taxes; monetary policy: increase commercial banks’ cash deposit ratio