What will counter-cyclical fiscal policy do?
A)Raise GDP and prices if used to eliminate a recessionary gap.
B)Raise GDP and lower prices if used to eliminate a recessionary gap.
C)Lower GDP and prices if used to eliminate a recessionary gap.
D)Raise GDP,but leave prices unchanged if used to eliminate a recessionary gap.

Question

Quizplus · Accepted Answer

Counter-cyclical fiscal policy, such as increasing government spending or cutting taxes during a recession, is designed to raise GDP by stimulating demand. This increased demand can also lead to higher prices, hence A is correct.

What Will Counter-Cyclical Fiscal Policy Do