Question

now suppose that the government immediately pursues an accommodative policy by increasing government purchases in response to the short run economic impact of the higher oil prices

Answer 1

now suppose that the government immediately pursues an accommodative policy by increasing government purchases in response to the short run economic impact of the higher oil prices The output will be $billion and the price level will increase.

What is accommodative policy?

When a central bank (like the Federal Reserve) tries to increase the general money supply to support the economy when growth is stalling, this is known as accommodating monetary policy, often known as loose credit or easy monetary policy (as measured by GDP). The goal of the policy is to allow the money supply to increase in step with both the demand for money and national revenue.

• The expansion of the money supply by central banks to stimulate the economy is known as accommodating monetary policy.
• The Federal funds rate has been decreased as part of monetary policies that are deemed accommodating.
• The goals of these policies are to lower the cost of borrowing money and boost consumer spending.

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