Assume that the government decides to use fiscal or monetary policy to stimulate the economy and that this action comes as a surprise to most individuals and businesses. In the short run, the result will be

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DWhen the government uses fiscal or monetary policy to stimulate the economy unexpectedly, it typically leads to an increase in aggregate demand. This increase in demand can lead to more hiring, thus decreasing the average duration of unemployment and the unemployment rate. Additionally, the increase in aggregate demand can lead to higher prices in the short run, but due to the surprise nature of the stimulus, it might initially cause a fall in the price level due to increased economic activity and efficiency before any inflationary effects take hold.

Assume That the Government Decides to Use Fiscal or Monetary