As a result of the increased deficit associated with discretionary fiscal policy,_____.
A)both the interest rate and real output fall
B)both the interest rate and nominal output rise
C)the interest rate falls and real output rises
D)the interest rate rises and real output falls
E)nominal output rises,real output falls,and the interest rate rises

Question

Quizplus · Accepted Answer

Discretionary fiscal policy, such as increased government spending or decreased taxes, typically leads to higher demand in the economy. This increased demand can push up both nominal output (due to higher spending and economic activity) and interest rates (as the government may need to borrow more, increasing demand for loanable funds).

As a Result of the Increased Deficit Associated with Discretionary