Question

What is the effect of expansionary fiscal policy on output and unemployment?

A Output increases and unemployment decreases Correct Answer Incorrect Answer
B Output increases and unemployment increases Correct Answer Incorrect Answer
C Output decreases and unemployment decreases Correct Answer Incorrect Answer
D Output decreases and unemployment increases Correct Answer Incorrect Answer
E None of these Correct Answer Incorrect Answer

Solution

Due to expansionary fiscal policy Output increases because IS curve shifts to the right as AD increases and unemployment decreases.

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