(Last Word) In response to the Great Recession, the federal government engaged in signiﬁcant deﬁcit-funded spending. While it kept the recession from getting worse, and did result in some
Positive economic growth, it did not fully achieve the desired result. Which of the following best
Explains why the ﬁscal policy actions fell short of their objective?
A) Despite the ﬁscal stimulus, aggregate demand continued to shift to the right.
B) The ﬁscal stimulus caused a signiﬁcant leftward shift of aggregate supply.
C) Offsetting monetary policy caused the aggregate demand to remain virtually unchanged, meaning that all gains in output came from aggregate supply shifts.
D) The ﬁscal stimulus shifted aggregate demand to the right, but not enough to restore full employment.

Question

Quizplus · Accepted Answer

The fiscal stimulus aimed to increase aggregate demand to boost economic activity and employment. However, if the stimulus was insufficient to restore full employment, it means that while it helped, it did not shift aggregate demand enough to achieve its full objective, hence falling short of fully countering the recession's effects.

(Last Word) in Response to the Great Recession, the Federal