Expenditure and tax multipliers are likely to be large
A) when the inflation rate is close to zero.
B) if the central bank keeps real interest rates constant.
C) when the only unemployment in the economy is due to the natural rate of unemployment.
D) when real GDP exceeds potential GDP.

Question

Quizplus · Accepted Answer

When the central bank keeps real interest rates constant, fiscal policy changes have a more direct impact on aggregate demand, leading to larger expenditure and tax multipliers.

Expenditure and Tax Multipliers Are Likely to Be Large