If the Effects of Expansionary Fiscal Policy Hit When the Economy

question 62

Multiple Choice

If the effects of expansionary fiscal policy hit when the economy is already expanding,

• A) the effects could lead to even deeper recession.
• B) the policy will have no effect.
• C) the policy is called an automatic stabilizer.
• D) it may lead to excessive aggregate demand and inflation.
• E) it will lead to high rates of unemployment along with high rates of inflation,known as stagflation.

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Definitions:

Parity Concept

A principle in economics that describes a state where the purchasing power of two currencies is equal when a basket of identical goods is priced the same in both countries.

Real Income

The income of an individual or group after adjusting for inflation, reflecting the true purchasing power of the income.

Farm Households

Families living and working on farms, typically involved in agricultural practices and production.

Prices Paid

The amount of money expended by consumers or businesses to purchase goods or services.