Why Would a Government Want to Use Expansionary Fiscal Policy

question 100

Multiple Choice

Why would a government want to use expansionary fiscal policy to help stimulate aggregate demand if,in the long run,we would expect prices to adjust and the economy to return to its long-run equilibrium on its own?

• A) Expansionary fiscal policy always works in stimulating aggregate demand.
• B) It could take a long time for prices to adjust by market forces alone.
• C) Expansionary fiscal policy has no adverse effects on the economy.
• D) When prices adjust during a recession,we see increases in inflation.
• E) Expansionary fiscal policy is easy to get approved by Congress and the president.

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Definitions:

Stress Response

The body's way of reacting to stress, involving various physiological changes such as increased heart rate and heightened senses to prepare for a "fight or flight" response.

Emotion of Fear

A primal response to potential threats, characterized by increased heart rate, adrenaline release, and heightened alertness, serving both protective and motivational roles.

Oxytocin

A hormone and neurotransmitter often associated with social bonding, childbirth, and lactation.

Cortisol

A hormone released by the adrenal glands in response to stress, which can increase blood sugar and suppress the immune system.