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If the interest rate is so low that it is over-stimulating economic growth, the recommended policy action should be what?

A) an expansionary fiscal policy.

B) an expansionary monetary policy.

C) a contractionary monetary policy.

D) the demand for money should be increased.

2 Answers

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  • pgreen
    Lv 6
    7 years ago

    Yes C, if not the excess of credit and money ends up into inflation or,

    more probably, as was seen in the last decades, into financial assets

    (or real estate) bubbles.

  • Anonymous
    7 years ago

    C, but you might want to know why.

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