The government might increase spending to end a recession because:
A) allowing short-run aggregate supply to adjust back to the long run can take a long time.
B) it causes prices to be lower in the new long-run equilibrium.
C) the economy enjoys a higher level of output in the long run.
D) None of these explain why the government might increase its spending to end a recession.

Question

Quizplus · Accepted Answer

Allowing short-run aggregate supply to adjust back to the long run can take a long time, and in the meantime, the economy might experience years of high unemployment and low output. Increasing government spending can stimulate demand and help end the recession more quickly.

The Government Might Increase Spending to End a Recession Because