"Expansionary fiscal policy is needed to increase Real GDP --- at least in the short run." The economist who said this most likely believes that

Question

Quizplus · Accepted Answer

The statement suggests that the economist believes that expansionary fiscal policy can increase Real GDP, at least in the short run. This implies that the AS curve is not vertical. Moreover, this also implies that the economist believes that there will not be a significant amount of crowding out associated with a rise in government spending, which eliminates option C. Therefore, the most likely choice is D, which supports the idea that the AS curve is upward-sloping. Option E is incorrect because it combines two unconnected choices. Option A is incorrect because it suggests the tax multiplier is larger than the government spending multiplier, which is not related to the statement.

"Expansionary Fiscal Policy Is Needed to Increase Real GDP ---