Income and employment fall. In a monetary production economy, the government has two roles. One is control of the money supply or monetary policy. The other is control of velocity or fiscal policy. However, in a monetary production economy, without credit, the two roles are one in the same.
Fiscal policy is monetary policy and monetary policy is fiscal policy.
The government is both the fiscal authority and the monetary authority. The government increases and decreases the money supply as it spends and taxes. When the government spends more, it mints coin out of its coffers and puts the coin into circulation. When it taxes, it takes the coin out of circulation and puts it back in its coffers. If prices rise, the government must increase taxes to take money out of circulation.