Question 6 (1 point) When an economy is at full employment, an expansionary fisc

Question

Question 6 (1 point)

When an economy is at full employment, an expansionary fiscal policy:

Question 6 options:

has the same multiplier effect as if the economy were in a recession.

does not affect the aggregate price level.

yields no temporary increase in output.

produces no long-run improvement in real output.

has the same multiplier effect as if the economy were in a recession.

does not affect the aggregate price level.

yields no temporary increase in output.

produces no long-run improvement in real output.

Explanation / Answer

When an economy is at full employment, an expansionary fiscal policy yields no temporary increase in output. This is because all ready economy is producing maximum output due to full employment.So any fiscal policy will lead to increase in price level.

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