POL-1.F—Explain (using graphs as appropriate) the effects of combined fiscal and monetary policy actions

Explain (using graphs as appropriate) the effects of combined fiscal and monetary policy actions.

• A combination of expansionary or contractionary fiscal and monetary policies may be used to restore full employment when the economy is in a negative (i.e., recessionary) or positive (i.e., inflationary) output gap.
• A combination of fiscal and monetary policies can influence aggregate demand, real output, the price level, and interest rates. [For additional details on fiscal and monetary policy actions and how to demonstrate their effects graphically, see LO POL-1.A and LO POL-1.D.]
• Enduring understanding POL-1: Fiscal and monetary policy have short-run effects on macroeconomic outcomes.