Answer to Question #166523 in Microeconomics for Nuri

Question

The objective of stable prices can, in the view of at least some economists, be tackled by adjustments 

in:

a. fiscal policy.

b. monetary policy.

c. all the above.

d. none of the above.

Answer 1

b. monetary policy.

An economy can reach price stability when the supply of money in an economy equals the demand for it. Increases in money supply tend to decrease interest rates and help to control deflation by providing upward pressure on prices.