Expansionary fiscal policy will result in _____ price level and _____ employment in the short run in an economy, other things constant
A)a higher; higher
B)a higher; lower
C)an indeterminate change; higher
D)a lower; lower
E)a higher; an indeterminate change in

Question

Quizplus · Accepted Answer

Expansionary fiscal policy refers to an increase in government spending and/or a decrease in taxes, which directly increases aggregate demand (AD). The increase in AD leads to a higher price level and higher employment in the short run due to an increase in output and demand for labor. Therefore, the best choice is A since it shows a higher price level and higher employment as a result of expansionary fiscal policy.

Expansionary Fiscal Policy Will Result in _____ Price Level and _____

Expansionary Fiscal Policy Will Result in _ Price Level and _