How could an expansionary fiscal policy increase real GDP and lower the price level?

Question

Quizplus · Accepted Answer

An expansionary fiscal policy involves increasing government spending and/or decreasing taxes in order to increase aggregate demand. If aggregate supply increases more than aggregate demand, then the increased production will lead to an increase in real GDP while the increased supply will lower the price level. This is known as a supply-side effect, where businesses, seeing increased demand, invest in additional capacity and improvements in technology, which in turn increases output and lowers the cost of production, leading to lower prices.

How Could an Expansionary Fiscal Policy Increase Real GDP and Lower