Refer to the information provided in Figure 12.2 below to answer the questions that follow. Figure 12.2
-Refer to Figure 12.2. An expansionary fiscal policy would be least effective in raising output with little or no inflation when the aggregate demand curve shifts from

Question

Refer to the information provided in Figure 12.2 below to answer the questions that follow.

Figure 12.2
-Refer to Figure 12.2. An expansionary fiscal policy would be least effective in raising output with little or no inflation when the aggregate demand curve shifts from

Quizplus · Accepted Answer

An expansionary fiscal policy is least effective in raising output with little or no inflation when the economy is near or at full capacity, which is typically represented by the vertical portion of the aggregate supply curve. The shift from AD₅ to AD₆ likely represents such a scenario, where additional demand primarily leads to higher prices rather than increased output.

Refer to the Information Provided in Figure 12