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      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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