Country X is in the midst of a recession.If the government pursues expansionary fiscal policy,then,in the long run,the price level will ________.If it does not pursue expansionary fiscal policy,then,in the long run,the price level will ________.

Question

Quizplus · Accepted Answer

Expansionary fiscal policy, such as increasing government spending or cutting taxes, leads to an increase in aggregate demand. This increased demand leads to an increase in prices in the long run, as producers raise prices to meet the increased demand. If the government does not pursue expansionary fiscal policy, the economy may continue to experience a recession, leading to a decrease in prices in the long run due to reduced demand. Therefore, the price level will increase if expansionary fiscal policy is pursued and decrease if it is not pursued.

Country X Is in the Midst of a Recession