Under which of the following scenarios would expansionary fiscal policy work best?

Question

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Expansionary fiscal policy works best when aggregate demand is low compared to the long-run equilibrium position of the economy, as this indicates there is slack in the economy which can be filled through government spending or tax cuts. In scenarios A and C, real shocks have occurred, which may require other policy interventions such as monetary policy or structural reforms. Scenario B, when the economy is at equilibrium in the long run, does not call for expansionary fiscal policy as there is no need to stimulate output or employment.

Under Which of the Following Scenarios Would Expansionary Fiscal Policy