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Basic Question 3 of 4

If fiscal policy is tight and monetary policy is easy, ______

A. the private sector will shrink and the public sector will expand.
B. the private sector will expand and the public sector will shrink.
C. both the private and public sector will shrink.

User Contributed Comments 2

User Comment
sharky7 why?
schweitzdm Tight fiscal policy = low govt spending

This means less money going into public sector, so it shrinks.

Easy (or loose) monetary policy = increasing the money supply, subsequent increase in AD

This means that the private sector will grow
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Learning Outcome Statements

explain the interaction of monetary and fiscal policy

CFA® 2025 Level I Curriculum, Volume 1, Module 4.