In Which of the Following Cases Is Expansionary Fiscal Policy

question 46

Multiple Choice

In which of the following cases is expansionary fiscal policy LEAST effective in increasing output?

• A)if wages adjust rapidly to maintain equilibrium in the labor market
• B)if wages do not change much even when there is high unemployment
• C)if it is combined with expansionary monetary policy
• D)if we have a Keynesian AS-curve
• E)if the Fed is trying hard to keep interest rates from rising

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