One advantage of using expansionary fiscal policy rather than relying on automatic adjustment to recover from a recessionary gap is that
A)the economy will overshoot potential GDP and a boom will be underway.
B)inflation will not be as stimulated.
C)the recovery may be more rapid.
D)the recovery will be slower, thereby causing less disruption.
E)price level will rise higher than otherwise.

Question

Quizplus · Accepted Answer

Expansionary fiscal policy involves government increasing spending and reducing taxes to stimulate aggregate demand and close a recessionary gap. This can lead to a more rapid recovery as the increased spending and tax cuts can quickly boost consumer and business confidence and lead to greater economic activity. Automatic adjustment, on the other hand, relies on market forces to adjust prices and wages to eventually close the gap, which can be a slower and more uncertain process.

One Advantage of Using Expansionary Fiscal Policy Rather Than Relying