Expansionary fiscal policy:
A) increases long-run aggregate supply.
B) decreases long-run aggregate supply.
C) increases aggregate demand.
D) decreases aggregate demand.

Question

Quizplus · Accepted Answer

Expansionary fiscal policy involves increasing government spending and/or cutting taxes in order to stimulate the economy. This leads to an increase in aggregate demand, as consumers have more money to spend and businesses are incentivized to invest and expand. However, this policy does not directly affect long-run aggregate supply, which is influenced by factors such as technology, education, and infrastructure.

Expansionary Fiscal Policy