A fiscal policy that increases government spending or cuts taxes is most appropriate when the economy is in:
A)a recessionary gap.
B)an inflationary gap.
C)a short-run equilibrium.
D)a long-run equilibrium

Question

Quizplus · Accepted Answer

A fiscal policy that increases government spending or cuts taxes is designed to stimulate demand in the economy, which is most appropriate during a recessionary gap when output is below potential.

A Fiscal Policy That Increases Government Spending or Cuts Taxes