Question 22 When is fiscal policy more effective at stimulating real GDP? When the marginal propensity to consumer is higher When the economy is in a liquidity trap When the economy has substantial "slack" or excess capacity, such as unemployed workers All of the other answers are correct.

Question 22 When is fiscal policy more effective at stimulating real GDP? When the marginal propensity to consumer is higher When the economy is in a liquidity trap When the economy has substantial "slack" or excess capacity, such as unemployed workers All of the other answers are correct.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Fiscal Policy and Money Market

Fiscal policy is one of the important tools that is used by the government to control inflation or aggregate demand in the economy. Under this policy, there are two rules which are used by the government, one is the expenditure of the government and the other is the taxation or income of the government which it collects from the public.

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If the equilibrium real GDP were higher than potential GDP, then a contractionary fiscal policy would cause the inflation rate to be ________ and real GDP to be ________. a. higher; higher b. higher; lower c. lower; higher d. lower; lower
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