Expansionary Fiscal Policy Should Be Used If

question 19

Multiple Choice

Expansionary fiscal policy should be used if:

• A)aggregate demand-aggregate supply equilibrium is below potential output.
• B)aggregate demand-aggregate supply equilibrium is above potential output.
• C)aggregate demand-aggregate supply equilibrium is equal to potential output.
• D)none of the above.

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Definitions:

Recession

A temporary stage of economic depletion, highlighted by a downturn in trade and industrial action, normally identified by a GDP reduction in two back-to-back quarters.

Stagflation

A situation in the economy where inflation and unemployment rates are high simultaneously, leading to slow economic growth.

Deflation

A decrease in the general price level of goods and services, often indicative of a reduction in the money supply or demand.

Japanese Industrialists

Business leaders and entrepreneurs in Japan who played a significant role in the industrialization and economic growth of the country.