Country X is in the midst of a recession.The government is likely to pursue ________ fiscal policy in order to shift the ________.

Question

Quizplus · Accepted Answer

In a recession, the government is likely to pursue expansionary fiscal policy in order to shift the aggregate demand (AD) curve to the right, increasing consumer spending and boosting economic growth. This is achieved by increasing government spending, cutting taxes, or both. Choices A, B, D, and E are not appropriate as they either involve the wrong type of fiscal policy (contractionary instead of expansionary) or seek to shift an inappropriate curve (LRAS or SRAS instead of AD).

Country X Is in the Midst of a Recession