The aim of countercyclical fiscal policy is to
A)shift the inflation adjustment line so that real GDP is equal to potential GDP.
B)reduce unemployment.
C)reduce inflation.
D)increase potential GDP.
E)shift the aggregate demand curve so that real GDP equals potential GDP.

Question

Quizplus · Accepted Answer

Countercyclical fiscal policy aims to shift the aggregate demand curve so that real GDP equals potential GDP. This is done through government intervention in the economy, such as increased government spending or tax cuts during times of economic recession. By increasing aggregate demand, countercyclical fiscal policy can help to stimulate economic growth and reduce unemployment.

The Aim of Countercyclical Fiscal Policy Is to