CFA Practice Question

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CFA Practice Question

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.
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
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