Economics · Macroeconomics
Which of the following market outcomes would most likely result from a successful contractionary monetary policy by the RBI (e.g., increasing the repo rate) combined with a successful contractionary fiscal policy by the government (e.g., cutting government spending)?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1A sustained rise in the Gini coefficient due to decreased social spending.
- 2Both Aggregate Demand (AD) and the equilibrium price level will decrease.✓
- 3Aggregate Supply (AS) will shift to the right, increasing GDP.
- 4Both Aggregate Demand (AD) and the equilibrium price level will increase.
Correct answer
Both Aggregate Demand (AD) and the equilibrium price level will decrease.
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