An expansionary fiscal policy will lead to
A)an increase in output and an increase in the interest rate.
B)an increase in output and a decrease in the interest rate.
C)a decrease in output and an increase in the interest rate.
D)a decrease in output and a decrease in the interest rate.

Question

Quizplus · Accepted Answer

Expansionary fiscal policy, such as increased government spending or tax cuts, boosts aggregate demand, leading to higher output. This increased demand for money can lead to higher interest rates.

An Expansionary Fiscal Policy Will Lead to