When aggregate demand is low enough to drive unemployment above the natural rate,
A) there is downward pressure on the price level,and the government may want to conduct contractionary fiscal policy.
B) the economy is entering into an expansion,and the government may want to conduct contractionary fiscal policy.
C) there is upward pressure on the price level,and the government may want to conduct contractionary fiscal policy.
D) there is upward pressure on the price level,and the government may want to conduct expansionary fiscal policy.
E) there is downward pressure on the price level,and the government may want to conduct expansionary fiscal policy.

Question

Quizplus · Accepted Answer

When aggregate demand is low, it leads to unemployment above the natural rate and downward pressure on prices. The government may use expansionary fiscal policy to boost demand and reduce unemployment.

When Aggregate Demand Is Low Enough to Drive Unemployment Above