The economy is in a recessionary gap,there is incomplete crowding out,and government implements expansionary fiscal policy.It follows that
A) Real GDP will fall.
B) the AD curve will shift to the right.
C) the price level will fall.
D) the recessionary gap will necessarily be completely eliminated.
E) b and d

Question

Quizplus · Accepted Answer

Expansionary fiscal policy shifts the aggregate demand (AD) curve to the right, which can help reduce a recessionary gap. However, incomplete crowding out means the gap may not be fully eliminated.

The Economy Is in a Recessionary Gap,there Is Incomplete Crowding