Ayushi posted an Question
August 11, 2020 • 22:31 pm 30 points
  • UGC NET
  • Economics

53. expansionary fiscal policy wili be most cffcctive in increasing real gross domestic product when (1) the aggregate supply curve is horizontal (2) the econom

53. Expansionary fiscal policy wili be most cffcctive in increasing real gross domestic product when (1) the aggregate supply curve is horizontal (2) the economy is at or above full-employment output (3) transfcr payments are decreased, while taxes remain unchanged (4) wages and prices are very flexiblo

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    Nidhi taparia Best Answer

    The correct answer is (1). Fiscal policy is the most successful when Aggregate Supply curve is horizontal or said to be in the Keynesian range. Because then, income rises with prices remaining constant.

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