Figure 10-2

-Refer to Figure 10-2.If the economy is below full-employment real GDP,what will the new long-run equilibrium be if the government employs an expansionary fiscal policy?

Question

Figure 10-2
 
-Refer to Figure 10-2.If the economy is below full-employment real GDP,what will the new long-run equilibrium be if the government employs an expansionary fiscal policy?

Quizplus · Accepted Answer

Expansionary fiscal policy aims to increase aggregate demand, moving the economy towards full employment. In the long run, this would shift the equilibrium to E2 and RGDPNR, which represents the full-employment level of real GDP.

Figure 10-2 -Refer to Figure 10-2.If the Economy Is Below Full-Employment Real