The price of imported oil rises. if the government wanted to stabilize output, which of the following could it do?
a. increase government expenditures or increase the money supply
b. increase government expenditures or decrease the money supply
c. decrease government expenditures or increase the money supply
d. decrease government expenditures or decrease the money supply

The correct answer is letter "A": increase government expenditures or increase the money supply.

Explanation:

Fiscal policy refers to the joint governmental decisions concerning taxation and spending of a nation. The term was coined by the British economist John Maynard Keynes (1883-1946) who claimed that governments could control rates of macroeconomic growth by raising the rate of employment, battling inflation and flattening business cycles.

Whether increasing government expenses or money supply, the overall economy will be balanced as long as the prices are going up as well.

say it in english maybe we can