If the economy is below full employment and the government uses an expansionary fiscal policy in an attempt to reduce unemployment:

Question

Quizplus · Accepted Answer

An expansionary fiscal policy – such as increased government spending or tax cuts – aims to increase aggregate demand in the economy, leading to an increase in output and potentially higher prices as well. In an economy below full employment, there is room for output to increase without causing inflationary pressures, making this policy effective in reducing unemployment without causing significant price increases.

If the Economy Is Below Full Employment and the Government