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21 December, 11:46

A stimulative fiscal policy combined with a restrictive monetary policy will necessarily cause

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  1. 21 December, 13:40
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    Interest rates to rise

    Explanation:

    Stimulative fiscal policy affects combined demand through changes in government policies, spending and taxation which eventually impacts employment and standard of living plus consumer spending and investment. Monetary policy affects the money supply in an economy, which then creates an impact on interest rates and the inflation rate.

    Hence, a stimulative fiscal policy combined with a restrictive monetary policy will necessarily cause interest rates to rise.
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