When the macro equilibrium is above full employment,fiscal policy should be used to shift aggregate demand by the amount of

Question

Quizplus · Accepted Answer

When macro equilibrium is above full employment, there is an excess of aggregate demand in the economy. Fiscal policy can be used to shift aggregate demand by the amount of this excess, which also allows for changes in the price level. Option A is incorrect because the difference between saving and investment does not relate to macro equilibrium or aggregate demand. Option B is incorrect because desired saving and desired investment are not directly related to macro equilibrium or aggregate demand. Option D is incorrect because one of the choices must be correct.

When the Macro Equilibrium Is Above Full Employment,fiscal Policy Should