According to the aggregate supply-aggregate demand model,an expansionary fiscal policy will,in the long run,
A) have the opposite effect of an expansionary monetary policy
B) increase both real GDP and the price level
C) increase real GDP and decrease the price level
D) increase real GDP and leave the price level unchanged
E) increase the price level and leave real GDP unchanged

Question

Quizplus · Accepted Answer

In the long run, an expansionary fiscal policy can lead to an increase in the price level due to higher demand, but real GDP remains unchanged as the economy returns to its potential output level.

According to the Aggregate Supply-Aggregate Demand Model,an Expansionary Fiscal Policy