Expansionary fiscal policy will result in a ____ price level and ____ employment in the short run.

Question

Quizplus · Accepted Answer

Expansionary fiscal policy involves increasing government spending and/or cutting taxes in order to stimulate the economy. This leads to an increase in aggregate demand, which in the short run, results in higher output and lower unemployment. However, as demand increases, so does price level. Therefore, the correct answer is A) higher price level and higher employment in the short run.

Expansionary Fiscal Policy Will Result in a ____ Price Level