Expansionary fiscal policy ________ the price level and ________ equilibrium real GDP.
A)decreases; increases
B)increases; decreases
C)increases; increases
D)decreases; decreases

Question

Quizplus · Accepted Answer

Expansionary fiscal policy, which involves increasing government spending, cutting taxes, or both, typically leads to an increase in the aggregate demand. This increase in demand generally causes the price level to rise and also leads to an increase in equilibrium real GDP as the economy moves towards a higher level of output.

Expansionary Fiscal Policy ________ the Price Level and ________ Equilibrium

Expansionary Fiscal Policy the Price Level and Equilibrium