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:

Benefits

Various forms of value, such as medical insurance, retirement plans, or paid leave, provided to employees in addition to wages or salaries.

Agreement

A meeting of two or more minds in regard to the terms of a contract; usually broken down into two events—an offer by one party to form a contract, and an acceptance of the offer by the person to whom the offer is made.

Illegal Contract

A contract that is void and unenforceable from the outset because it involves activities that are against the law or public policy.

Restitution

The act of compensating for loss, damage, or injury caused, often involving the return of stolen or lost property to the rightful owner.