Explanation:
The central bank lowering interest rates to near zero indicates an expansionary monetary policy intended to stimulate economic growth. The most complementary fiscal policy action would be expansionary fiscal policy. Increasing government spending on infrastructure projects stimulates aggregate demand and acts as an expansionary fiscal policy. Options A and B are contractionary, and Option D is neutral.
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Q.58 A country is experiencing a period of low economic growth and low inflation. The central bank has already lowered interest rates to near zero. Which of the following fiscal policy actions would be most complementary to the central bank's monetary policy stance in this situation?
A
Implementing significant tax increases to reduce the budget deficit.
B
Reducing government transfers to households.
C
Increasing government spending on infrastructure projects.
D
Maintaining the current level of government spending.
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