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:

Negative Reinforcement

A process in behavior modification where the removal of an undesirable outcome strengthens a behavior.

Punishment

A process in behavior modification that involves presenting an adverse event or outcome in order to decrease the likelihood of a behavior recurring.

Biologically Primed

Innately equipped or predisposed by biology to learn certain behaviors or develop certain physical or psychological traits.

Associate Sickness

The process by which individuals link certain stimuli or experiences with feeling ill.