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:

Stimulus Discrimination

The learned ability to distinguish between similar stimuli and respond appropriately to each one.

Green Light

An expression meaning to give approval to proceed with a project or action.

Lever Pushing

A task used in experimental psychology and behavioral neuroscience to study the principles of operant conditioning by training an animal to press a lever to receive a reward.

Red Light

A signal used in traffic lights, indicating a command to stop, or metaphorically, an indication to halt an activity or process.