Question

Suppose the government decides to pursue an expansionary fiscal policy. Within the AD-AS framework, what will be the impact on the economy?

1.Aggregate supply in the economy will decrease at various price levels.

2.Aggregate demand in the economy will decrease at various price levels.

3.Total production and employment will increase, while inflation decrease.

4.Real GDP, the general level of prices and employment will increase.

Answer 1

4) Real GDP, the general level of prices and employment will increase.