"Expansionary fiscal policy is always 100 percent effective when the short-run aggregate supply curve is horizontal." Is this statement true?
A) Yes, because theoretically nothing else can offset the effects of fiscal policy.
B) Yes, when the long-run aggregate supply curve is horizontal too.
C) No, because crowding out could take place.
D) No, because the increased spending may cause the price level to increase.
Correct Answer:
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