If Policymakers Implement an Expansionary Fiscal Policy but Do Not

question 201

Multiple Choice

If policymakers implement an expansionary fiscal policy but do not take into account the potential for crowding out,the new equilibrium level of GDP is likely to

• A)be at potential GDP.
• B)be above potential GDP.
• C)be below potential GDP.
• D)There is insufficient information given here to draw a conclusion.

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Definitions:

Large Lot Sizes

Refers to the practice of producing or purchasing goods in large quantities, typically to achieve economies of scale but potentially leading to increased inventory costs.

Variability Increase

A situation where the diversity or spread of data points widens, indicating less consistency and predictability in the process or system observed.