What is the effect of a successful expansionary fiscal policy on price level and output? Multiple choice question. Both decrease. Price increases and output decreases. Both increase. Price decreases and output increases
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Step 1: Expansionary fiscal policy involves increasing government spending and/or decreasing taxes to stimulate the economy. Show more…
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Specify whether expansionary or contractionary fiscal policy would seem to be most appropriate in response to each of the situations below and sketch a diagram using aggregate demand and aggregate supply curves to illustrate your answer: a. A recession. b. A stock market collapse that hurts consumer and business confidence. c. Extremely rapid growth of exports. d. Rising inflation. e. A rise in the natural rate of unemployment. f. A rise in oil prices.
In the Short-Run Macroeconomics model, what happens when the Supply slope shifts to the right? A. Prices decrease B. Prices flatline C. Deflation will occur D. Both supply and prices stay the same
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An expansionary fiscal policy that takes the form of an increase in government purchases carries the possibility that private investment and, as a result, the future growth rate of a. Is crowded out; potential output is reduced b. Rises to an unsustainable level; real GDP is reduced c. Increases; net exports increases. d. Is crowded out; corporate tax revenue is reduced e. Increases; aggregate demand increases
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