- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 4. Monetary Policy
- Subject 4. Interaction of Monetary and Fiscal Policy
CFA Practice Question
If fiscal policy is tight and monetary policy is easy, ______
B. the private sector will expand and the public sector will shrink.
C. both the private and public sector will shrink.
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.
Correct Answer: B
The private sector will be stimulated and rise as a share of GDP and the 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 |