"Expansionary Fiscal Policy Is Needed to Increase Real GDP ---

question 11

Multiple Choice

"Expansionary fiscal policy is needed to increase Real GDP --- at least in the short run." The economist who said this most likely believes that

• A) the tax multiplier is larger than the government spending multiplier.
• B) the AS curve is vertical.
• C) there will be a great deal of crowding out connected with a rise in government spending.
• D) the AS curve is upward-sloping.
• E) c and d

---

Definitions:

Monetary Policy

The process by which the central bank, or monetary authority of a country, controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.

Full Employment

A situation in an economy where all available labor resources are being used in the most efficient way, typically with only natural unemployment remaining.

Marginal Propensity

Measures the portion of additional income that an individual or entity spends on consuming goods rather than saving.

Multiplier

The ratio of the change in an endogenous variable to the change in an exogenous variable it is dependent on, often used in the context of fiscal policy’s effect on the economy.