When There Is Excess Aggregate Demand,the Appropriate Fiscal Policy Would

question 21

Multiple Choice

When there is excess aggregate demand,the appropriate fiscal policy would be for the government to

• A)Make budget surpluses smaller.
• B)Make budget surpluses larger.
• C)Make budget deficits larger.
• D)Increase the public debt.

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Definitions:

Supply Curve

A graphical representation of the relationship between the price of a good and the quantity of the good that suppliers are willing to sell.

Perfectly Inelastic Demand

A situation in which the demand for a product does not change as the price changes.

Perfectly Elastic Supply

describes a market situation where the quantity supplied can change infinitely in response to any change in price.

Elastic Demand

A situation where the demand for a product significantly changes in response to changes in the product's price.