Fiscal policy is a good option to stimulate an economy when:
A) unemployment is very high.
B) the economy is very close to its long-run potential growth rate.
C) a real shock occurs.
D) the economy is suffering from a decrease in productivity.

Question

Quizplus · Accepted Answer

Fiscal policy can be used to increase government spending and/or decrease taxes, which can lead to an increase in aggregate demand and ultimately stimulate the economy. This is particularly useful when there is high unemployment, as it can help to create jobs and reduce unemployment.

Fiscal Policy Is a Good Option to Stimulate an Economy